Correlation Between Cgrowth Capital and ITM Power

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

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

Diversification Opportunities for Cgrowth Capital and ITM Power

0.46

Correlation Coefficient

Cgrowth Capital  ITM Power

Very weak diversification

The 3 months correlation between Cgrowth and ITM is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Cgrowth Capital and ITM Power Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power Plc and Cgrowth Capital 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 Cgrowth Capital are associated (or correlated) with ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power Plc has no effect on the direction of Cgrowth Capital i.e., Cgrowth Capital and ITM Power go up and down completely randomly.

Pair Corralation between Cgrowth Capital and ITM Power

Given the investment horizon of 90 days Cgrowth Capital is expected to generate 3.69 times more return on investment than ITM Power. However, Cgrowth Capital is 3.69 times more volatile than ITM Power Plc. It trades about 0.05 of its potential returns per unit of risk. ITM Power Plc is currently generating about -0.01 per unit of risk. If you would invest  0.24  in Cgrowth Capital on December 28, 2024 and sell it today you would lose (0.04) from holding Cgrowth Capital or give up 16.67% of portfolio value over 90 days.

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

Cgrowth Capital  vs.  ITM Power Plc

Cgrowth Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cgrowth Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Cgrowth Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

ITM Power Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITM Power Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITM Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cgrowth Capital and ITM Power

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

The idea behind Cgrowth Capital and ITM Power Plc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.