Correlation Between River and Indutrade
Can any of the company-specific risk be diversified away by investing in both River and Indutrade 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 River and Indutrade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River and Mercantile and Indutrade AB, you can compare the effects of market volatilities on River and Indutrade 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 River with a short position of Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of River and Indutrade.
Diversification Opportunities for River and Indutrade
Excellent diversification
The 3 months correlation between River and Indutrade is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and River 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 River and Mercantile are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of River i.e., River and Indutrade go up and down completely randomly.
Pair Corralation between River and Indutrade
Assuming the 90 days trading horizon River and Mercantile is expected to under-perform the Indutrade. But the stock apears to be less risky and, when comparing its historical volatility, River and Mercantile is 8.82 times less risky than Indutrade. The stock trades about -0.15 of its potential returns per unit of risk. The Indutrade AB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 27,540 in Indutrade AB on October 23, 2024 and sell it today you would earn a total of 2,140 from holding Indutrade AB or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
River and Mercantile vs. Indutrade AB
Performance |
| Timeline |
| River and Mercantile |
| Indutrade AB |
River and Indutrade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River and Indutrade
The main advantage of trading using opposite River and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.| River vs. Jupiter Green Investment | River vs. Monks Investment Trust | River vs. Caledonia Investments | River vs. JB Hunt Transport |
| Indutrade vs. Home Depot | Indutrade vs. Weiss Korea Opportunity | Indutrade vs. River and Mercantile | Indutrade vs. Chrysalis Investments |
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 CEOs Directory module to screen CEOs from public companies around the world.
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