# Number of Stocks investment

#### Chirag

##### Newbie
Invested in corporate 1
Got profit
Sold the shares
To be invested in corporate 2
Is the investment in corporate 2 dependent/independent of the investment in corporate 1?

Invested in corporate 1
Got profit
Sold the shares
To be invested in corporate 2
Is the investment in corporate 2 dependent/independent of the investment in corporate 1?
That depends.

Strictly speaking, the investments are independent, as they are separate share holdings in different corporations.

But, if the companies are in the same market sector, then they will probably be dependent to some extent.

You should also consider the extent to which the companies hold shares in each other.

Also, that the corporations may be reliant on each other for some or much of their revenue.

As you don't indicate which corporations, it's impossible to offer a simpler answer.

Hopefully, these notes assist in answering the question.

Another statistical oriented method is to download the EOD data from a provider, say yahoo.com, for a longer period - 2 years for example, and use Excel to calculate the correlation coefficient between the daily close of the 2 securities.

Anything above +0.7 shows a strong dependency, you would want it to be below that figure.

• Exactly 1. A perfect downhill (negative) linear relationship
• 0.70. A strong downhill (negative) linear relationship
• 0.50. A moderate downhill (negative) relationship
• 0.30. A weak downhill (negative) linear relationship
• 0. No linear relationship
• +0.30. A weak uphill (positive) linear relationship
• +0.50. A moderate uphill (positive) relationship
• +0.70. A strong uphill (positive) linear relationship
• Exactly +1. A perfect uphill (positive) linear relationship

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