Correlation Between I Tech and Serstech

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

By analyzing existing cross correlation between I Tech and Serstech AB, you can compare the effects of market volatilities on I Tech and Serstech 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 Serstech. Check out your portfolio center. Please also check ongoing floating volatility patterns of I Tech and Serstech.

Diversification Opportunities for I Tech and Serstech

0.35

Correlation Coefficient

I Tech  Serstech

Weak diversification

The 3 months correlation between ITECH and Serstech is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding I Tech and Serstech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Serstech AB 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 Serstech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Serstech AB has no effect on the direction of I Tech i.e., I Tech and Serstech go up and down completely randomly.

Pair Corralation between I Tech and Serstech

Assuming the 90 days trading horizon I Tech is expected to generate 1.31 times less return on investment than Serstech. But when comparing it to its historical volatility, I Tech is 2.16 times less risky than Serstech. It trades about 0.44 of its potential returns per unit of risk. Serstech AB is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Serstech AB on October 8, 2024 and sell it today you would earn a total of  21.00  from holding Serstech AB or generate 17.95% return on investment over 90 days.

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

I Tech  vs.  Serstech AB

I Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in I Tech are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, I Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Serstech AB

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Serstech AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Serstech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with I Tech and Serstech

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

The idea behind I Tech and Serstech AB 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.