Correlation Between Industrial Investment and Indian Railway
Can any of the company-specific risk be diversified away by investing in both Industrial Investment and Indian Railway 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 Investment and Indian Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Investment Trust and Indian Railway Finance, you can compare the effects of market volatilities on Industrial Investment and Indian Railway 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 Investment with a short position of Indian Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Investment and Indian Railway.
Diversification Opportunities for Industrial Investment and Indian Railway
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Industrial and Indian is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Investment Trust and Indian Railway Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Railway Finance and Industrial Investment 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 Investment Trust are associated (or correlated) with Indian Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Railway Finance has no effect on the direction of Industrial Investment i.e., Industrial Investment and Indian Railway go up and down completely randomly.
Pair Corralation between Industrial Investment and Indian Railway
Assuming the 90 days trading horizon Industrial Investment is expected to generate 4.69 times less return on investment than Indian Railway. In addition to that, Industrial Investment is 1.16 times more volatile than Indian Railway Finance. It trades about 0.05 of its total potential returns per unit of risk. Indian Railway Finance is currently generating about 0.25 per unit of volatility. If you would invest 13,829 in Indian Railway Finance on September 19, 2024 and sell it today you would earn a total of 1,837 from holding Indian Railway Finance or generate 13.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Investment Trust vs. Indian Railway Finance
Performance |
| Timeline |
| Industrial Investment |
| Indian Railway Finance |
Industrial Investment and Indian Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Investment and Indian Railway
The main advantage of trading using opposite Industrial Investment and Indian Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Investment position performs unexpectedly, Indian Railway 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 Indian Railway will offset losses from the drop in Indian Railway's long position.| Industrial Investment vs. Reliance Industries Limited | Industrial Investment vs. HDFC Bank Limited | Industrial Investment vs. Kingfa Science Technology | Industrial Investment vs. Rico Auto Industries |
| Indian Railway vs. Unitech Limited | Indian Railway vs. Jaypee Infratech Limited | Indian Railway vs. Ortel Communications Limited | Indian Railway vs. Sasken Technologies Limited |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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