Correlation Between Innovative Industrial and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Innovative Industrial and Auto Trader 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 Innovative Industrial and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovative Industrial Properties and Auto Trader Group, you can compare the effects of market volatilities on Innovative Industrial and Auto Trader 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 Innovative Industrial with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Industrial and Auto Trader.
Diversification Opportunities for Innovative Industrial and Auto Trader
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Innovative and Auto is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Industrial Properti and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Innovative Industrial 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 Innovative Industrial Properties are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Innovative Industrial i.e., Innovative Industrial and Auto Trader go up and down completely randomly.
Pair Corralation between Innovative Industrial and Auto Trader
Assuming the 90 days trading horizon Innovative Industrial Properties is expected to under-perform the Auto Trader. In addition to that, Innovative Industrial is 2.93 times more volatile than Auto Trader Group. It trades about -0.24 of its total potential returns per unit of risk. Auto Trader Group is currently generating about -0.15 per unit of volatility. If you would invest 88,820 in Auto Trader Group on September 25, 2024 and sell it today you would lose (10,400) from holding Auto Trader Group or give up 11.71% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Innovative Industrial Properti vs. Auto Trader Group
Performance |
Timeline |
Innovative Industrial |
Auto Trader Group |
Innovative Industrial and Auto Trader Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Innovative Industrial and Auto Trader
The main advantage of trading using opposite Innovative Industrial and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovative Industrial position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.Innovative Industrial vs. Uniper SE | Innovative Industrial vs. Mulberry Group PLC | Innovative Industrial vs. London Security Plc | Innovative Industrial vs. Triad Group PLC |
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Check out your portfolio center.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.
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