Correlation Between DATA Communications and Intertek Group

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

By analyzing existing cross correlation between DATA Communications Management and Intertek Group Plc, you can compare the effects of market volatilities on DATA Communications and Intertek Group 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 DATA Communications with a short position of Intertek Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATA Communications and Intertek Group.

Diversification Opportunities for DATA Communications and Intertek Group

0.6

Correlation Coefficient

DATA Communications  Intertek Group

Poor diversification

The 3 months correlation between DATA and Intertek is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding DATA Communications Management and Intertek Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intertek Group Plc and DATA Communications 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 DATA Communications Management are associated (or correlated) with Intertek Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intertek Group Plc has no effect on the direction of DATA Communications i.e., DATA Communications and Intertek Group go up and down completely randomly.

Pair Corralation between DATA Communications and Intertek Group

Assuming the 90 days horizon DATA Communications Management is expected to under-perform the Intertek Group. In addition to that, DATA Communications is 3.08 times more volatile than Intertek Group Plc. It trades about -0.11 of its total potential returns per unit of risk. Intertek Group Plc is currently generating about -0.05 per unit of volatility. If you would invest  6,444  in Intertek Group Plc on September 4, 2024 and sell it today you would lose (382.00) from holding Intertek Group Plc or give up 5.93% of portfolio value over 90 days.

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

DATA Communications Management  vs.  Intertek Group Plc

DATA Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DATA Communications Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Intertek Group Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intertek Group Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Intertek Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DATA Communications and Intertek Group

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

The idea behind DATA Communications Management and Intertek Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.