Correlation Between Industria and International Consolidated

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

By analyzing existing cross correlation between Industria de Diseno and International Consolidated Airlines, you can compare the effects of market volatilities on Industria and International Consolidated 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 Industria with a short position of International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industria and International Consolidated.

Diversification Opportunities for Industria and International Consolidated

0.4

Correlation Coefficient

Industria  International Consolidated

Very weak diversification

The 3 months correlation between Industria and International is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseno and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated and Industria 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 Industria de Diseno are associated (or correlated) with International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Industria i.e., Industria and International Consolidated go up and down completely randomly.

Pair Corralation between Industria and International Consolidated

Assuming the 90 days trading horizon Industria is expected to generate 13.47 times less return on investment than International Consolidated. But when comparing it to its historical volatility, Industria de Diseno is 1.34 times less risky than International Consolidated. It trades about 0.03 of its potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  236.00  in International Consolidated Airlines on September 13, 2024 and sell it today you would earn a total of  114.00  from holding International Consolidated Airlines or generate 48.31% return on investment over 90 days.

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

Industria de Diseno  vs.  International Consolidated Air

Industria de Diseno

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Industria de Diseno are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Industria is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

International Consolidated

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industria and International Consolidated

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

The idea behind Industria de Diseno and International Consolidated Airlines 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.