Correlation Between Industrial Commercial and NYSE Composite
Can any of the company-specific risk be diversified away by investing in both Industrial Commercial and NYSE Composite 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 Commercial and NYSE Composite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Commercial Bank and NYSE Composite, you can compare the effects of market volatilities on Industrial Commercial and NYSE Composite 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 Commercial with a short position of NYSE Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Commercial and NYSE Composite.
Diversification Opportunities for Industrial Commercial and NYSE Composite
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Industrial and NYSE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Commercial Bank and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite and Industrial Commercial 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 Commercial Bank are associated (or correlated) with NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of Industrial Commercial i.e., Industrial Commercial and NYSE Composite go up and down completely randomly.
Pair Corralation between Industrial Commercial and NYSE Composite
Assuming the 90 days horizon Industrial Commercial Bank is expected to generate 2.17 times more return on investment than NYSE Composite. However, Industrial Commercial is 2.17 times more volatile than NYSE Composite. It trades about 0.17 of its potential returns per unit of risk. NYSE Composite is currently generating about 0.08 per unit of risk. If you would invest 1,035 in Industrial Commercial Bank on February 25, 2024 and sell it today you would earn a total of 150.00 from holding Industrial Commercial Bank or generate 14.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Industrial Commercial Bank vs. NYSE Composite
Performance |
Timeline |
Industrial Commercial and NYSE Composite Volatility Contrast
Predicted Return Density |
Returns |
Industrial Commercial Bank
Pair trading matchups for Industrial Commercial
NYSE Composite
Pair trading matchups for NYSE Composite
Pair Trading with Industrial Commercial and NYSE Composite
The main advantage of trading using opposite Industrial Commercial and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Commercial position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.Industrial Commercial vs. Bank of America | Industrial Commercial vs. Bank of America | Industrial Commercial vs. Wells Fargo | Industrial Commercial vs. Bank of America |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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