Correlation Between S P and Industrial Investment
Can any of the company-specific risk be diversified away by investing in both S P and Industrial 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 S P and Industrial Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between S P Apparels and Industrial Investment Trust, you can compare the effects of market volatilities on S P and Industrial 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 S P with a short position of Industrial Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of S P and Industrial Investment.
Diversification Opportunities for S P and Industrial Investment
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SPAL and Industrial is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding S P Apparels and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment and S P 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 S P Apparels are associated (or correlated) with Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of S P i.e., S P and Industrial Investment go up and down completely randomly.
Pair Corralation between S P and Industrial Investment
Assuming the 90 days trading horizon S P Apparels is expected to under-perform the Industrial Investment. In addition to that, S P is 1.02 times more volatile than Industrial Investment Trust. It trades about -0.03 of its total potential returns per unit of risk. Industrial Investment Trust is currently generating about 0.38 per unit of volatility. If you would invest 32,700 in Industrial Investment Trust on September 1, 2024 and sell it today you would earn a total of 7,980 from holding Industrial Investment Trust or generate 24.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
S P Apparels vs. Industrial Investment Trust
Performance |
| Timeline |
| S P Apparels |
| Industrial Investment |
S P and Industrial Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S P and Industrial Investment
The main advantage of trading using opposite S P and Industrial Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S P position performs unexpectedly, Industrial 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 Industrial Investment will offset losses from the drop in Industrial Investment's long position.The idea behind S P Apparels and Industrial Investment Trust 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.| Industrial Investment vs. Indian Metals Ferro | Industrial Investment vs. Tamilnadu Telecommunication Limited | Industrial Investment vs. Home First Finance | Industrial Investment vs. Hi Tech Pipes 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 Stocks Directory module to find actively traded stocks across global markets.
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