Correlation Between Industrial and Agricultural Bank
Can any of the company-specific risk be diversified away by investing in both Industrial and Agricultural Bank 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 Agricultural Bank 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 Agricultural Bank, you can compare the effects of market volatilities on Industrial and Agricultural Bank 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 Agricultural Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Agricultural Bank.
Diversification Opportunities for Industrial and Agricultural Bank
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Industrial and Agricultural is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Agricultural Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agricultural Bank 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 Agricultural Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agricultural Bank has no effect on the direction of Industrial i.e., Industrial and Agricultural Bank go up and down completely randomly.
Pair Corralation between Industrial and Agricultural Bank
Assuming the 90 days horizon Industrial is expected to generate 1.07 times less return on investment than Agricultural Bank. In addition to that, Industrial is 1.12 times more volatile than Agricultural Bank. It trades about 0.05 of its total potential returns per unit of risk. Agricultural Bank is currently generating about 0.06 per unit of volatility. If you would invest 29.00 in Agricultural Bank on August 23, 2024 and sell it today you would earn a total of 18.00 from holding Agricultural Bank or generate 62.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.65% |
| Values | Daily Returns |
Industrial and Commercial vs. Agricultural Bank
Performance |
| Timeline |
| Industrial and Commercial |
| Agricultural Bank |
Industrial and Agricultural Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial and Agricultural Bank
The main advantage of trading using opposite Industrial and Agricultural Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial position performs unexpectedly, Agricultural Bank 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 Agricultural Bank will offset losses from the drop in Agricultural Bank's long position.| Industrial vs. Svenska Handelsbanken PK | Industrial vs. ANZ Group Holdings | Industrial vs. Westpac Banking | Industrial vs. National Australia Bank |
| Agricultural Bank vs. China Construction Bank | Agricultural Bank vs. National Australia Bank | Agricultural Bank vs. Svenska Handelsbanken AB | Agricultural Bank vs. Bank of America |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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