Correlation Between Industrial and Barclays PLC

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

Diversification Opportunities for Industrial and Barclays PLC

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Industrial and Barclays is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Barclays PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC 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 Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC has no effect on the direction of Industrial i.e., Industrial and Barclays PLC go up and down completely randomly.

Pair Corralation between Industrial and Barclays PLC

Assuming the 90 days horizon Industrial is expected to generate 2.48 times less return on investment than Barclays PLC. But when comparing it to its historical volatility, Industrial and Commercial is 1.2 times less risky than Barclays PLC. It trades about 0.05 of its potential returns per unit of risk. Barclays PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  291.00  in Barclays PLC on September 6, 2024 and sell it today you would earn a total of  45.00  from holding Barclays PLC or generate 15.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Industrial and Commercial  vs.  Barclays PLC

 Performance 
       Timeline  
Industrial and Commercial 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Barclays PLC 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Barclays PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Industrial and Barclays PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Industrial and Barclays PLC

The main advantage of trading using opposite Industrial and Barclays PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial position performs unexpectedly, Barclays PLC 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 Barclays PLC will offset losses from the drop in Barclays PLC's long position.
The idea behind Industrial and Commercial and Barclays PLC 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.
Check out your portfolio center.
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.

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