Correlation Between Indo Amines and Action Construction

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

By analyzing existing cross correlation between Indo Amines Limited and Action Construction Equipment, you can compare the effects of market volatilities on Indo Amines and Action Construction 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 Indo Amines with a short position of Action Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Amines and Action Construction.

Diversification Opportunities for Indo Amines and Action Construction

0.54

Correlation Coefficient

Indo Amines  Action Construction

Very weak diversification

The 3 months correlation between Indo and Action is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Indo Amines Limited and Action Construction Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Action Construction and Indo Amines 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 Indo Amines Limited are associated (or correlated) with Action Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Action Construction has no effect on the direction of Indo Amines i.e., Indo Amines and Action Construction go up and down completely randomly.

Pair Corralation between Indo Amines and Action Construction

Assuming the 90 days trading horizon Indo Amines Limited is expected to under-perform the Action Construction. In addition to that, Indo Amines is 1.35 times more volatile than Action Construction Equipment. It trades about 0.0 of its total potential returns per unit of risk. Action Construction Equipment is currently generating about 0.02 per unit of volatility. If you would invest  127,185  in Action Construction Equipment on August 31, 2024 and sell it today you would earn a total of  1,580  from holding Action Construction Equipment or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Indo Amines Limited  vs.  Action Construction Equipment

Indo Amines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Amines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Indo Amines is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Action Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Action Construction Equipment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Action Construction is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Indo Amines and Action Construction

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

The idea behind Indo Amines Limited and Action Construction Equipment 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.