Correlation Between Delta Manufacturing and ITI

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

Diversification Opportunities for Delta Manufacturing and ITI

0.48

Correlation Coefficient

Delta Manufacturing  ITI

Very weak diversification

The 3 months correlation between Delta and ITI is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Delta Manufacturing Limited and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI 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 ITI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITI Limited has no effect on the direction of Delta Manufacturing i.e., Delta Manufacturing and ITI go up and down completely randomly.

Pair Corralation between Delta Manufacturing and ITI

Assuming the 90 days trading horizon Delta Manufacturing Limited is expected to under-perform the ITI. But the stock apears to be less risky and, when comparing its historical volatility, Delta Manufacturing Limited is 1.48 times less risky than ITI. The stock trades about -0.17 of its potential returns per unit of risk. The ITI Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  28,663  in ITI Limited on November 29, 2024 and sell it today you would lose (1,403) from holding ITI Limited or give up 4.89% of portfolio value over 90 days.

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

Delta Manufacturing Limited  vs.  ITI 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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ITI Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ITI Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ITI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Delta Manufacturing and ITI

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

The idea behind Delta Manufacturing Limited and ITI 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.