Correlation Between Delta Manufacturing and Innova Captab

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

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

Diversification Opportunities for Delta Manufacturing and Innova Captab

0.9

Correlation Coefficient

Delta Manufacturing  Innova Captab

Almost no diversification

The 3 months correlation between Delta and Innova is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Delta Manufacturing Limited and Innova Captab Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innova Captab Limited and Delta Manufacturing 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 Delta Manufacturing Limited are associated (or correlated) with Innova Captab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innova Captab Limited has no effect on the direction of Delta Manufacturing i.e., Delta Manufacturing and Innova Captab go up and down completely randomly.

Pair Corralation between Delta Manufacturing and Innova Captab

Assuming the 90 days trading horizon Delta Manufacturing Limited is expected to under-perform the Innova Captab. In addition to that, Delta Manufacturing is 1.01 times more volatile than Innova Captab Limited. It trades about -0.23 of its total potential returns per unit of risk. Innova Captab Limited is currently generating about -0.06 per unit of volatility. If you would invest  105,620  in Innova Captab Limited on December 26, 2024 and sell it today you would lose (15,890) from holding Innova Captab Limited or give up 15.04% of portfolio value over 90 days.

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

Delta Manufacturing Limited  vs.  Innova Captab Limited

Delta Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Manufacturing Limited 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 technical and fundamental 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.

Innova Captab Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innova Captab Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Delta Manufacturing and Innova Captab

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

The idea behind Delta Manufacturing Limited and Innova Captab Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.