Correlation Between Industrial Bank and MEDIANA CoLtd
Can any of the company-specific risk be diversified away by investing in both Industrial Bank and MEDIANA CoLtd 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 Bank and MEDIANA CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Bank and MEDIANA CoLtd, you can compare the effects of market volatilities on Industrial Bank and MEDIANA CoLtd 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 Bank with a short position of MEDIANA CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and MEDIANA CoLtd.
Diversification Opportunities for Industrial Bank and MEDIANA CoLtd
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Industrial and MEDIANA is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and MEDIANA CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIANA CoLtd and Industrial Bank 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 Bank are associated (or correlated) with MEDIANA CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIANA CoLtd has no effect on the direction of Industrial Bank i.e., Industrial Bank and MEDIANA CoLtd go up and down completely randomly.
Pair Corralation between Industrial Bank and MEDIANA CoLtd
Assuming the 90 days trading horizon Industrial Bank is expected to generate 4.64 times less return on investment than MEDIANA CoLtd. But when comparing it to its historical volatility, Industrial Bank is 4.11 times less risky than MEDIANA CoLtd. It trades about 0.06 of its potential returns per unit of risk. MEDIANA CoLtd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 457,500 in MEDIANA CoLtd on August 29, 2024 and sell it today you would earn a total of 22,500 from holding MEDIANA CoLtd or generate 4.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Bank vs. MEDIANA CoLtd
Performance |
| Timeline |
| Industrial Bank |
| MEDIANA CoLtd |
Industrial Bank and MEDIANA CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Bank and MEDIANA CoLtd
The main advantage of trading using opposite Industrial Bank and MEDIANA CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Bank position performs unexpectedly, MEDIANA CoLtd 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 MEDIANA CoLtd will offset losses from the drop in MEDIANA CoLtd's long position.| Industrial Bank vs. TOPMATERIAL LTD | Industrial Bank vs. LS Materials | Industrial Bank vs. Taegu Broadcasting | Industrial Bank vs. Top Material Co |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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