Correlation Between Dear Cashmere and ITM Power

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

By analyzing existing cross correlation between Dear Cashmere Holding and ITM Power Plc, you can compare the effects of market volatilities on Dear Cashmere and ITM Power 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 Dear Cashmere with a short position of ITM Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dear Cashmere and ITM Power.

Diversification Opportunities for Dear Cashmere and ITM Power

0.18

Correlation Coefficient

Dear Cashmere  ITM Power

Average diversification

The 3 months correlation between Dear and ITM is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dear Cashmere Holding and ITM Power Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power Plc and Dear Cashmere 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 Dear Cashmere Holding are associated (or correlated) with ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power Plc has no effect on the direction of Dear Cashmere i.e., Dear Cashmere and ITM Power go up and down completely randomly.

Pair Corralation between Dear Cashmere and ITM Power

Given the investment horizon of 90 days Dear Cashmere Holding is expected to under-perform the ITM Power. In addition to that, Dear Cashmere is 2.15 times more volatile than ITM Power Plc. It trades about -0.08 of its total potential returns per unit of risk. ITM Power Plc is currently generating about -0.06 per unit of volatility. If you would invest  44.00  in ITM Power Plc on December 2, 2024 and sell it today you would lose (9.00) from holding ITM Power Plc or give up 20.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Dear Cashmere Holding  vs.  ITM Power Plc

Dear Cashmere Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dear Cashmere Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ITM Power Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITM Power Plc 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 basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Dear Cashmere and ITM Power

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

The idea behind Dear Cashmere Holding and ITM Power 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.