Correlation Between I Tech and High Coast

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

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

Diversification Opportunities for I Tech and High Coast

-0.34

Correlation Coefficient

I Tech  High Coast

Very good diversification

The 3 months correlation between ITECH and High is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding I Tech and High Coast Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Coast Distillery and I Tech 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 I Tech are associated (or correlated) with High Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Coast Distillery has no effect on the direction of I Tech i.e., I Tech and High Coast go up and down completely randomly.

Pair Corralation between I Tech and High Coast

Assuming the 90 days trading horizon I Tech is expected to generate 2.09 times less return on investment than High Coast. But when comparing it to its historical volatility, I Tech is 1.32 times less risky than High Coast. It trades about 0.05 of its potential returns per unit of risk. High Coast Distillery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,980  in High Coast Distillery on September 3, 2024 and sell it today you would earn a total of  500.00  from holding High Coast Distillery or generate 12.56% return on investment over 90 days.

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

I Tech  vs.  High Coast Distillery

I Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in I Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, I Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

High Coast Distillery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in High Coast Distillery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, High Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with I Tech and High Coast

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

The idea behind I Tech and High Coast Distillery 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.