Correlation Between Industrial and By Health

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

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

Diversification Opportunities for Industrial and By Health

0.41

Correlation Coefficient

Industrial  By Health

Very weak diversification

The 3 months correlation between Industrial and 300146 is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and By health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on By health and 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 Industrial and Commercial are associated (or correlated) with By Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of By health has no effect on the direction of Industrial i.e., Industrial and By Health go up and down completely randomly.

Pair Corralation between Industrial and By Health

Assuming the 90 days trading horizon Industrial is expected to generate 2.17 times less return on investment than By Health. But when comparing it to its historical volatility, Industrial and Commercial is 2.35 times less risky than By Health. It trades about 0.1 of its potential returns per unit of risk. By health is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,091  in By health on September 4, 2024 and sell it today you would earn a total of  190.00  from holding By health or generate 17.42% return on investment over 90 days.

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

Industrial and Commercial  vs.  By health

Industrial and Commercial

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

By health

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in By health are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, By Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and By Health

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

The idea behind Industrial and Commercial and By health 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.