Correlation Between Industrial and AUPU Home

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

Diversification Opportunities for Industrial and AUPU Home

0.35

Correlation Coefficient

Industrial  AUPU Home

Weak diversification

The 3 months correlation between Industrial and AUPU is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and AUPU Home Style in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUPU Home Style 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 AUPU Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUPU Home Style has no effect on the direction of Industrial i.e., Industrial and AUPU Home go up and down completely randomly.

Pair Corralation between Industrial and AUPU Home

Assuming the 90 days trading horizon Industrial is expected to generate 2.5 times less return on investment than AUPU Home. But when comparing it to its historical volatility, Industrial and Commercial is 1.57 times less risky than AUPU Home. It trades about 0.09 of its potential returns per unit of risk. AUPU Home Style is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  941.00  in AUPU Home Style on September 4, 2024 and sell it today you would earn a total of  183.00  from holding AUPU Home Style or generate 19.45% return on investment over 90 days.

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

Industrial and Commercial  vs.  AUPU Home Style

Industrial and Commercial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 6 (%) 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.

AUPU Home Style

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Industrial and AUPU Home

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

The idea behind Industrial and Commercial and AUPU Home Style 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.