Correlation Between Consolidated Construction and ILFS Investment
Can any of the company-specific risk be diversified away by investing in both Consolidated Construction and ILFS Investment 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 Consolidated Construction and ILFS Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Construction Consortium and ILFS Investment Managers, you can compare the effects of market volatilities on Consolidated Construction and ILFS Investment 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 Consolidated Construction with a short position of ILFS Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Construction and ILFS Investment.
Diversification Opportunities for Consolidated Construction and ILFS Investment
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Consolidated and ILFS is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Construction Cons and ILFS Investment Managers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ILFS Investment Managers and Consolidated Construction 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 Consolidated Construction Consortium are associated (or correlated) with ILFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ILFS Investment Managers has no effect on the direction of Consolidated Construction i.e., Consolidated Construction and ILFS Investment go up and down completely randomly.
Pair Corralation between Consolidated Construction and ILFS Investment
Assuming the 90 days trading horizon Consolidated Construction Consortium is expected to generate 1.43 times more return on investment than ILFS Investment. However, Consolidated Construction is 1.43 times more volatile than ILFS Investment Managers. It trades about 0.12 of its potential returns per unit of risk. ILFS Investment Managers is currently generating about -0.07 per unit of risk. If you would invest 1,144 in Consolidated Construction Consortium on November 2, 2024 and sell it today you would earn a total of 525.00 from holding Consolidated Construction Consortium or generate 45.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Construction Cons vs. ILFS Investment Managers
Performance |
| Timeline |
| Consolidated Construction |
| ILFS Investment Managers |
Consolidated Construction and ILFS Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Construction and ILFS Investment
The main advantage of trading using opposite Consolidated Construction and ILFS Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Construction position performs unexpectedly, ILFS Investment 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 ILFS Investment will offset losses from the drop in ILFS Investment's long position.The idea behind Consolidated Construction Consortium and ILFS Investment Managers 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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