Correlation Between Italian Thai and Power Line

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

By analyzing existing cross correlation between Italian Thai Development Public and Power Line Engineering, you can compare the effects of market volatilities on Italian Thai and Power Line 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 Italian Thai with a short position of Power Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Italian Thai and Power Line.

Diversification Opportunities for Italian Thai and Power Line

0.79

Correlation Coefficient

Italian Thai  Power Line

Poor diversification

The 3 months correlation between Italian and Power is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Italian Thai Development Publi and Power Line Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Line Engineering and Italian Thai 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 Italian Thai Development Public are associated (or correlated) with Power Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Line Engineering has no effect on the direction of Italian Thai i.e., Italian Thai and Power Line go up and down completely randomly.

Pair Corralation between Italian Thai and Power Line

Assuming the 90 days trading horizon Italian Thai Development Public is expected to under-perform the Power Line. But the stock apears to be less risky and, when comparing its historical volatility, Italian Thai Development Public is 1.02 times less risky than Power Line. The stock trades about -0.73 of its potential returns per unit of risk. The Power Line Engineering is currently generating about -0.29 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Power Line Engineering on December 4, 2024 and sell it today you would lose (5.00) from holding Power Line Engineering or give up 15.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Italian Thai Development Publi  vs.  Power Line Engineering

Italian Thai Develop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Italian Thai Development Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Power Line Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Line Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Italian Thai and Power Line

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

The idea behind Italian Thai Development Public and Power Line Engineering 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.