Correlation Between Italtile and Bytes Technology

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

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

Diversification Opportunities for Italtile and Bytes Technology

-0.68

Correlation Coefficient

Italtile  Bytes Technology

Excellent diversification

The 3 months correlation between Italtile and Bytes is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Italtile and Bytes Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bytes Technology and Italtile 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 Italtile are associated (or correlated) with Bytes Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bytes Technology has no effect on the direction of Italtile i.e., Italtile and Bytes Technology go up and down completely randomly.

Pair Corralation between Italtile and Bytes Technology

Assuming the 90 days trading horizon Italtile is expected to generate 0.95 times more return on investment than Bytes Technology. However, Italtile is 1.05 times less risky than Bytes Technology. It trades about 0.04 of its potential returns per unit of risk. Bytes Technology is currently generating about -0.12 per unit of risk. If you would invest  129,800  in Italtile on October 13, 2024 and sell it today you would earn a total of  4,100  from holding Italtile or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Italtile  vs.  Bytes Technology

Italtile

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Italtile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Italtile is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bytes Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bytes Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Italtile and Bytes Technology

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

The idea behind Italtile and Bytes Technology 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.