Correlation Between Industrial and Eit Environmental

Can any of the company-specific risk be diversified away by investing in both Industrial and Eit Environmental 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 Eit Environmental 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 Eit Environmental Development, you can compare the effects of market volatilities on Industrial and Eit Environmental 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 Eit Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Eit Environmental.

Diversification Opportunities for Industrial and Eit Environmental

0.65

Correlation Coefficient

Industrial  Eit Environmental

Poor diversification

The 3 months correlation between Industrial and Eit is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Eit Environmental Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eit Environmental 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 Eit Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eit Environmental has no effect on the direction of Industrial i.e., Industrial and Eit Environmental go up and down completely randomly.

Pair Corralation between Industrial and Eit Environmental

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.53 times more return on investment than Eit Environmental. However, Industrial and Commercial is 1.9 times less risky than Eit Environmental. It trades about 0.35 of its potential returns per unit of risk. Eit Environmental Development is currently generating about 0.07 per unit of risk. If you would invest  605.00  in Industrial and Commercial on September 23, 2024 and sell it today you would earn a total of  48.00  from holding Industrial and Commercial or generate 7.93% return on investment over 90 days.

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

Industrial and Commercial  vs.  Eit Environmental Development

Industrial and Commercial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Eit Environmental

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eit Environmental Development are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eit Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Eit Environmental

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

The idea behind Industrial and Commercial and Eit Environmental Development 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.