Correlation Between Indutrade and Baker Steel
Can any of the company-specific risk be diversified away by investing in both Indutrade and Baker Steel 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 Indutrade and Baker Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indutrade AB and Baker Steel Resources, you can compare the effects of market volatilities on Indutrade and Baker Steel 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 Indutrade with a short position of Baker Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indutrade and Baker Steel.
Diversification Opportunities for Indutrade and Baker Steel
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Indutrade and Baker is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources and Indutrade 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 Indutrade AB are associated (or correlated) with Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of Indutrade i.e., Indutrade and Baker Steel go up and down completely randomly.
Pair Corralation between Indutrade and Baker Steel
Assuming the 90 days trading horizon Indutrade AB is expected to generate 0.74 times more return on investment than Baker Steel. However, Indutrade AB is 1.36 times less risky than Baker Steel. It trades about 0.01 of its potential returns per unit of risk. Baker Steel Resources is currently generating about -0.02 per unit of risk. If you would invest 28,126 in Indutrade AB on October 15, 2024 and sell it today you would earn a total of 14.00 from holding Indutrade AB or generate 0.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indutrade AB vs. Baker Steel Resources
Performance |
| Timeline |
| Indutrade AB |
| Baker Steel Resources |
Indutrade and Baker Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indutrade and Baker Steel
The main advantage of trading using opposite Indutrade and Baker Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indutrade position performs unexpectedly, Baker Steel 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 Baker Steel will offset losses from the drop in Baker Steel's long position.| Indutrade vs. Walmart | Indutrade vs. BYD Co | Indutrade vs. Volkswagen AG | Indutrade vs. Volkswagen AG Non Vtg |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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