Correlation Between Central Asia and Indutrade

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

By analyzing existing cross correlation between Central Asia Metals and Indutrade AB, you can compare the effects of market volatilities on Central Asia and Indutrade 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 Central Asia with a short position of Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and Indutrade.

Diversification Opportunities for Central Asia and Indutrade

0.91

Correlation Coefficient

Central Asia  Indutrade

Almost no diversification

The 3 months correlation between Central and Indutrade is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Central Asia 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 Central Asia Metals are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Central Asia i.e., Central Asia and Indutrade go up and down completely randomly.

Pair Corralation between Central Asia and Indutrade

Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the Indutrade. In addition to that, Central Asia is 1.15 times more volatile than Indutrade AB. It trades about -0.09 of its total potential returns per unit of risk. Indutrade AB is currently generating about -0.08 per unit of volatility. If you would invest  30,700  in Indutrade AB on September 14, 2024 and sell it today you would lose (2,250) from holding Indutrade AB or give up 7.33% of portfolio value over 90 days.

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

Central Asia Metals  vs.  Indutrade AB

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Central Asia and Indutrade

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

The idea behind Central Asia Metals and Indutrade AB 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.