Correlation Between IDT and InterDigital

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

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

Diversification Opportunities for IDT and InterDigital

0.9

Correlation Coefficient

IDT  InterDigital

Almost no diversification

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

Pair Corralation between IDT and InterDigital

Considering the 90-day investment horizon IDT is expected to generate 1.23 times less return on investment than InterDigital. In addition to that, IDT is 1.6 times more volatile than InterDigital. It trades about 0.16 of its total potential returns per unit of risk. InterDigital is currently generating about 0.32 per unit of volatility. If you would invest  13,488  in InterDigital on September 2, 2024 and sell it today you would earn a total of  6,108  from holding InterDigital or generate 45.28% return on investment over 90 days.

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

IDT Corp.  vs.  InterDigital

IDT Corporation

Risk-Adjusted Performance

12 of 100

Good

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

InterDigital

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterDigital are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, InterDigital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IDT and InterDigital

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

The idea behind IDT Corporation and InterDigital 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.