Correlation Between DATA Communications and Mitie Group

Can any of the company-specific risk be diversified away by investing in both DATA Communications and Mitie 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 Mitie 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 Mitie Group Plc, you can compare the effects of market volatilities on DATA Communications and Mitie 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 Mitie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATA Communications and Mitie Group.

Diversification Opportunities for DATA Communications and Mitie Group

-0.46

Correlation Coefficient

DATA Communications  Mitie Group

Very good diversification

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

Pair Corralation between DATA Communications and Mitie Group

Assuming the 90 days horizon DATA Communications Management is expected to under-perform the Mitie Group. In addition to that, DATA Communications is 1.77 times more volatile than Mitie Group Plc. It trades about -0.02 of its total potential returns per unit of risk. Mitie Group Plc is currently generating about 0.06 per unit of volatility. If you would invest  554.00  in Mitie Group Plc on December 28, 2024 and sell it today you would earn a total of  41.00  from holding Mitie Group Plc or generate 7.4% return on investment over 90 days.

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

DATA Communications Management  vs.  Mitie Group Plc

DATA Communications

Risk-Adjusted Performance

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 nearly stable fundamental indicators, DATA Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitie Group Plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitie Group Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mitie Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DATA Communications and Mitie Group

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

The idea behind DATA Communications Management and Mitie 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.