Correlation Between Industrial Bank and Lion Chemtech
Can any of the company-specific risk be diversified away by investing in both Industrial Bank and Lion Chemtech 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 Lion Chemtech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Bank and Lion Chemtech Co, you can compare the effects of market volatilities on Industrial Bank and Lion Chemtech 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 Lion Chemtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Lion Chemtech.
Diversification Opportunities for Industrial Bank and Lion Chemtech
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Industrial and Lion is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Lion Chemtech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Chemtech 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 Lion Chemtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Chemtech has no effect on the direction of Industrial Bank i.e., Industrial Bank and Lion Chemtech go up and down completely randomly.
Pair Corralation between Industrial Bank and Lion Chemtech
Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.47 times more return on investment than Lion Chemtech. However, Industrial Bank is 2.12 times less risky than Lion Chemtech. It trades about 0.52 of its potential returns per unit of risk. Lion Chemtech Co is currently generating about -0.16 per unit of risk. If you would invest 1,438,000 in Industrial Bank on November 3, 2024 and sell it today you would earn a total of 115,000 from holding Industrial Bank or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Bank vs. Lion Chemtech Co
Performance |
| Timeline |
| Industrial Bank |
| Lion Chemtech |
Industrial Bank and Lion Chemtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Bank and Lion Chemtech
The main advantage of trading using opposite Industrial Bank and Lion Chemtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Bank position performs unexpectedly, Lion Chemtech 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 Lion Chemtech will offset losses from the drop in Lion Chemtech's long position.| Industrial Bank vs. Coloray International Investment | Industrial Bank vs. Infinitt Healthcare Co | Industrial Bank vs. DSC Investment | Industrial Bank vs. Tway Air 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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