Correlation Between Innovative Technology and Telecoms Informatics

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

By analyzing existing cross correlation between Innovative Technology Development and Telecoms Informatics JSC, you can compare the effects of market volatilities on Innovative Technology and Telecoms Informatics 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 Innovative Technology with a short position of Telecoms Informatics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Technology and Telecoms Informatics.

Diversification Opportunities for Innovative Technology and Telecoms Informatics

0.59

Correlation Coefficient

Innovative Technology  Telecoms Informatics

Very weak diversification

The 3 months correlation between Innovative and Telecoms is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Technology Developm and Telecoms Informatics JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecoms Informatics JSC and Innovative Technology 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 Innovative Technology Development are associated (or correlated) with Telecoms Informatics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecoms Informatics JSC has no effect on the direction of Innovative Technology i.e., Innovative Technology and Telecoms Informatics go up and down completely randomly.

Pair Corralation between Innovative Technology and Telecoms Informatics

Assuming the 90 days trading horizon Innovative Technology Development is expected to generate 0.85 times more return on investment than Telecoms Informatics. However, Innovative Technology Development is 1.18 times less risky than Telecoms Informatics. It trades about 0.12 of its potential returns per unit of risk. Telecoms Informatics JSC is currently generating about 0.06 per unit of risk. If you would invest  1,160,000  in Innovative Technology Development on September 12, 2024 and sell it today you would earn a total of  165,000  from holding Innovative Technology Development or generate 14.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Innovative Technology Developm  vs.  Telecoms Informatics JSC

Innovative Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Technology Development are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Innovative Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Telecoms Informatics JSC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Telecoms Informatics JSC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Telecoms Informatics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Innovative Technology and Telecoms Informatics

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

The idea behind Innovative Technology Development and Telecoms Informatics JSC 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.