Correlation Between Tecom and InnoDisk

Can any of the company-specific risk be diversified away by investing in both Tecom and InnoDisk 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 Tecom and InnoDisk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tecom Co and InnoDisk, you can compare the effects of market volatilities on Tecom and InnoDisk 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 Tecom with a short position of InnoDisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tecom and InnoDisk.

Diversification Opportunities for Tecom and InnoDisk

-0.18

Correlation Coefficient

Tecom  InnoDisk

Good diversification

The 3 months correlation between Tecom and InnoDisk is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tecom Co and InnoDisk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoDisk and Tecom 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 Tecom Co are associated (or correlated) with InnoDisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoDisk has no effect on the direction of Tecom i.e., Tecom and InnoDisk go up and down completely randomly.

Pair Corralation between Tecom and InnoDisk

Assuming the 90 days trading horizon Tecom is expected to generate 7.1 times less return on investment than InnoDisk. In addition to that, Tecom is 1.04 times more volatile than InnoDisk. It trades about 0.02 of its total potential returns per unit of risk. InnoDisk is currently generating about 0.14 per unit of volatility. If you would invest  21,800  in InnoDisk on December 24, 2024 and sell it today you would earn a total of  5,250  from holding InnoDisk or generate 24.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tecom Co  vs.  InnoDisk

Tecom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tecom Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Tecom is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

InnoDisk

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InnoDisk are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, InnoDisk showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tecom and InnoDisk

The main advantage of trading using opposite Tecom and InnoDisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tecom position performs unexpectedly, InnoDisk 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 InnoDisk will offset losses from the drop in InnoDisk's long position.

The idea behind Tecom Co and InnoDisk 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.