Correlation Between Industrial Bank and National Plastic

Can any of the company-specific risk be diversified away by investing in both Industrial Bank and National Plastic 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 Industrial Bank and National Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Industrial Bank and National Plastic Co, you can compare the effects of market volatilities on Industrial Bank and National Plastic 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 Industrial Bank with a short position of National Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and National Plastic.

Diversification Opportunities for Industrial Bank and National Plastic

0.26

Correlation Coefficient

Industrial Bank  National Plastic

Modest diversification

The 3 months correlation between Industrial and National is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and National Plastic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Plastic and Industrial Bank 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 Industrial Bank are associated (or correlated) with National Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Plastic has no effect on the direction of Industrial Bank i.e., Industrial Bank and National Plastic go up and down completely randomly.

Pair Corralation between Industrial Bank and National Plastic

Assuming the 90 days trading horizon Industrial Bank is expected to generate 1.0 times more return on investment than National Plastic. However, Industrial Bank is 1.0 times less risky than National Plastic. It trades about 0.07 of its potential returns per unit of risk. National Plastic Co is currently generating about 0.0 per unit of risk. If you would invest  1,359,000  in Industrial Bank on September 12, 2024 and sell it today you would earn a total of  70,000  from holding Industrial Bank or generate 5.15% return on investment over 90 days.

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

Industrial Bank  vs.  National Plastic Co

Industrial Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrial Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

National Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Plastic Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, National Plastic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrial Bank and National Plastic

The main advantage of trading using opposite Industrial Bank and National Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Bank position performs unexpectedly, National Plastic 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 National Plastic will offset losses from the drop in National Plastic's long position.

The idea behind Industrial Bank and National Plastic Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.