Correlation Between Dodla Dairy and ITI

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

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

Diversification Opportunities for Dodla Dairy and ITI

-0.05

Correlation Coefficient

Dodla Dairy  ITI

Good diversification

The 3 months correlation between Dodla and ITI is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dodla Dairy Limited and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI Limited and Dodla Dairy 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 Dodla Dairy 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 Dodla Dairy i.e., Dodla Dairy and ITI go up and down completely randomly.

Pair Corralation between Dodla Dairy and ITI

Assuming the 90 days trading horizon Dodla Dairy Limited is expected to under-perform the ITI. But the stock apears to be less risky and, when comparing its historical volatility, Dodla Dairy Limited is 3.14 times less risky than ITI. The stock trades about -0.11 of its potential returns per unit of risk. The ITI Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  21,830  in ITI Limited on October 26, 2024 and sell it today you would earn a total of  14,380  from holding ITI Limited or generate 65.87% return on investment over 90 days.

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

Dodla Dairy Limited  vs.  ITI Limited

Dodla Dairy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodla Dairy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ITI Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ITI Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, ITI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dodla Dairy and ITI

The main advantage of trading using opposite Dodla Dairy and ITI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodla Dairy 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 Dodla Dairy 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.