Correlation Between Garuda Construction and ITI

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

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

Diversification Opportunities for Garuda Construction and ITI

-0.41

Correlation Coefficient

Garuda Construction  ITI

Very good diversification

The 3 months correlation between Garuda and ITI is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI Limited and Garuda Construction 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 Garuda Construction Engineering 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 Garuda Construction i.e., Garuda Construction and ITI go up and down completely randomly.

Pair Corralation between Garuda Construction and ITI

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to under-perform the ITI. In addition to that, Garuda Construction is 1.13 times more volatile than ITI Limited. It trades about -0.11 of its total potential returns per unit of risk. ITI Limited is currently generating about 0.01 per unit of volatility. If you would invest  30,260  in ITI Limited on August 31, 2024 and sell it today you would lose (693.00) from holding ITI Limited or give up 2.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	50.79%
Values	Daily Returns

Garuda Construction Engineerin  vs.  ITI Limited

Garuda Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Construction Engineering 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 basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

ITI Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITI Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ITI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Garuda Construction and ITI

The main advantage of trading using opposite Garuda Construction and ITI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garuda Construction 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 Garuda Construction Engineering 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .