Correlation Between Direct Capital and Itay Financial

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

By analyzing existing cross correlation between Direct Capital Investments and Itay Financial AA, you can compare the effects of market volatilities on Direct Capital and Itay Financial 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 Direct Capital with a short position of Itay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Capital and Itay Financial.

Diversification Opportunities for Direct Capital and Itay Financial

-0.46

Correlation Coefficient

Direct Capital  Itay Financial

Very good diversification

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

Pair Corralation between Direct Capital and Itay Financial

Assuming the 90 days trading horizon Direct Capital Investments is expected to under-perform the Itay Financial. But the stock apears to be less risky and, when comparing its historical volatility, Direct Capital Investments is 3.9 times less risky than Itay Financial. The stock trades about -0.06 of its potential returns per unit of risk. The Itay Financial AA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  35,950  in Itay Financial AA on December 2, 2024 and sell it today you would earn a total of  32,280  from holding Itay Financial AA or generate 89.79% return on investment over 90 days.

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

Direct Capital Investments  vs.  Itay Financial AA

Direct Capital Inves

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direct Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Itay Financial AA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Itay Financial AA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Itay Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Capital and Itay Financial

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

The idea behind Direct Capital Investments and Itay Financial AA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.