Correlation Between Innovative Technology and Development Investment

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

By analyzing existing cross correlation between Innovative Technology Development and Development Investment Construction, you can compare the effects of market volatilities on Innovative Technology and Development Investment 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 Innovative Technology with a short position of Development Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Technology and Development Investment.

Diversification Opportunities for Innovative Technology and Development Investment

-0.09

Correlation Coefficient

Innovative Technology  Development Investment

Good diversification

The 3 months correlation between Innovative and Development is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Technology Developm and Development Investment Constru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Development Investment and Innovative Technology 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 Innovative Technology Development are associated (or correlated) with Development Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Development Investment has no effect on the direction of Innovative Technology i.e., Innovative Technology and Development Investment go up and down completely randomly.

Pair Corralation between Innovative Technology and Development Investment

Assuming the 90 days trading horizon Innovative Technology is expected to generate 1.04 times less return on investment than Development Investment. But when comparing it to its historical volatility, Innovative Technology Development is 1.44 times less risky than Development Investment. It trades about 0.07 of its potential returns per unit of risk. Development Investment Construction is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,520,000  in Development Investment Construction on September 30, 2024 and sell it today you would earn a total of  80,000  from holding Development Investment Construction or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.21%
Values	Daily Returns

Innovative Technology Developm  vs.  Development Investment Constru

Innovative Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Technology Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Innovative Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Development Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Development Investment Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Development Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Innovative Technology and Development Investment

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

The idea behind Innovative Technology Development and Development Investment Construction 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.