Correlation Between INKON Life and Railway Signal

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

By analyzing existing cross correlation between INKON Life Technology and Railway Signal Communication, you can compare the effects of market volatilities on INKON Life and Railway Signal 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 INKON Life with a short position of Railway Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of INKON Life and Railway Signal.

Diversification Opportunities for INKON Life and Railway Signal

0.87

Correlation Coefficient

INKON Life  Railway Signal

Very poor diversification

The 3 months correlation between INKON and Railway is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding INKON Life Technology and Railway Signal Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Railway Signal Commu and INKON Life 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 INKON Life Technology are associated (or correlated) with Railway Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Railway Signal Commu has no effect on the direction of INKON Life i.e., INKON Life and Railway Signal go up and down completely randomly.

Pair Corralation between INKON Life and Railway Signal

Assuming the 90 days trading horizon INKON Life Technology is expected to generate 1.39 times more return on investment than Railway Signal. However, INKON Life is 1.39 times more volatile than Railway Signal Communication. It trades about 0.01 of its potential returns per unit of risk. Railway Signal Communication is currently generating about 0.0 per unit of risk. If you would invest  956.00  in INKON Life Technology on September 30, 2024 and sell it today you would lose (18.00) from holding INKON Life Technology or give up 1.88% of portfolio value over 90 days.

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

INKON Life Technology  vs.  Railway Signal Communication

INKON Life Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Railway Signal Commu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with INKON Life and Railway Signal

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

The idea behind INKON Life Technology and Railway Signal Communication 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.