Correlation Between Amada and Industrial Commercial
Can any of the company-specific risk be diversified away by investing in both Amada and Industrial Commercial 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 Amada and Industrial Commercial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amada Co and Industrial Commercial Bank, you can compare the effects of market volatilities on Amada and Industrial Commercial 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 Amada with a short position of Industrial Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amada and Industrial Commercial.
Diversification Opportunities for Amada and Industrial Commercial
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Amada and Industrial is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Amada Co and Industrial Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Commercial and Amada 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 Amada Co are associated (or correlated) with Industrial Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Commercial has no effect on the direction of Amada i.e., Amada and Industrial Commercial go up and down completely randomly.
Pair Corralation between Amada and Industrial Commercial
Assuming the 90 days horizon Amada Co is expected to generate 1.04 times more return on investment than Industrial Commercial. However, Amada is 1.04 times more volatile than Industrial Commercial Bank. It trades about 0.1 of its potential returns per unit of risk. Industrial Commercial Bank is currently generating about 0.04 per unit of risk. If you would invest 2,784 in Amada Co on January 19, 2024 and sell it today you would earn a total of 1,670 from holding Amada Co or generate 59.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Amada Co vs. Industrial Commercial Bank
Performance |
| Timeline |
| Amada |
| Industrial Commercial |
Amada and Industrial Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amada and Industrial Commercial
The main advantage of trading using opposite Amada and Industrial Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amada position performs unexpectedly, Industrial Commercial 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 Commercial will offset losses from the drop in Industrial Commercial's long position.The idea behind Amada Co and Industrial Commercial Bank 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 Commercial vs. ANZ Group Holdings | Industrial Commercial vs. National Australia Bank | Industrial Commercial vs. Bank of America | Industrial Commercial 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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