Correlation Between Industrial Bank and FnGuide

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

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

Diversification Opportunities for Industrial Bank and FnGuide

-0.52

Correlation Coefficient

Industrial Bank  FnGuide

Excellent diversification

The 3 months correlation between Industrial and FnGuide is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and FnGuide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FnGuide 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 FnGuide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FnGuide has no effect on the direction of Industrial Bank i.e., Industrial Bank and FnGuide go up and down completely randomly.

Pair Corralation between Industrial Bank and FnGuide

Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.13 times more return on investment than FnGuide. However, Industrial Bank is 7.48 times less risky than FnGuide. It trades about 0.06 of its potential returns per unit of risk. FnGuide is currently generating about -0.08 per unit of risk. If you would invest  1,409,000  in Industrial Bank on September 14, 2024 and sell it today you would earn a total of  54,000  from holding Industrial Bank or generate 3.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Industrial Bank  vs.  FnGuide

Industrial Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 4 (%) 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.

FnGuide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FnGuide has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial Bank and FnGuide

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

The idea behind Industrial Bank and FnGuide 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.