Correlation Between Investment Trust and Industrial Investment

Can any of the company-specific risk be diversified away by investing in both Investment Trust and Industrial Investment at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Investment Trust and Industrial Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Investment Trust and Industrial Investment Trust, you can compare the effects of market volatilities on Investment Trust and Industrial Investment and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Investment Trust with a short position of Industrial Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Trust and Industrial Investment.

Diversification Opportunities for Investment Trust and Industrial Investment

0.47

Correlation Coefficient

Investment Trust  Industrial Investment

Very weak diversification

The 3 months correlation between Investment and Industrial is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment and Investment Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Investment Trust are associated (or correlated) with Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of Investment Trust i.e., Investment Trust and Industrial Investment go up and down completely randomly.

Pair Corralation between Investment Trust and Industrial Investment

Assuming the 90 days trading horizon The Investment Trust is expected to under-perform the Industrial Investment. But the stock apears to be less risky and, when comparing its historical volatility, The Investment Trust is 1.0 times less risky than Industrial Investment. The stock trades about -0.17 of its potential returns per unit of risk. The Industrial Investment Trust is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  40,680  in Industrial Investment Trust on November 29, 2024 and sell it today you would lose (9,635) from holding Industrial Investment Trust or give up 23.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

The Investment Trust  vs.  Industrial Investment Trust

Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Industrial Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrial Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Investment Trust and Industrial Investment

The main advantage of trading using opposite Investment Trust and Industrial Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Trust position performs unexpectedly, Industrial Investment can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Industrial Investment will offset losses from the drop in Industrial Investment's long position.

The idea behind The Investment Trust and Industrial Investment Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .