Correlation Between Industrial and PharmaResources

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Can any of the company-specific risk be diversified away by investing in both Industrial and PharmaResources 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 and PharmaResources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial and Commercial and PharmaResources Co Ltd, you can compare the effects of market volatilities on Industrial and PharmaResources 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 with a short position of PharmaResources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and PharmaResources.

Diversification Opportunities for Industrial and PharmaResources

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Industrial and PharmaResources is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and PharmaResources Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PharmaResources and Industrial 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 and Commercial are associated (or correlated) with PharmaResources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PharmaResources has no effect on the direction of Industrial i.e., Industrial and PharmaResources go up and down completely randomly.

Pair Corralation between Industrial and PharmaResources

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.27 times more return on investment than PharmaResources. However, Industrial and Commercial is 3.65 times less risky than PharmaResources. It trades about 0.09 of its potential returns per unit of risk. PharmaResources Co Ltd is currently generating about 0.02 per unit of risk. If you would invest  403.00  in Industrial and Commercial on September 19, 2024 and sell it today you would earn a total of  248.00  from holding Industrial and Commercial or generate 61.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Industrial and Commercial  vs.  PharmaResources Co Ltd

 Performance 
       Timeline  
Industrial and Commercial 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.
PharmaResources 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in PharmaResources Co Ltd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PharmaResources sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrial and PharmaResources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Industrial and PharmaResources

The main advantage of trading using opposite Industrial and PharmaResources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial position performs unexpectedly, PharmaResources 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 PharmaResources will offset losses from the drop in PharmaResources' long position.
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The idea behind Industrial and Commercial and PharmaResources Co Ltd 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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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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