Correlation Between ITI and DiGiSPICE Technologies

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

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

Diversification Opportunities for ITI and DiGiSPICE Technologies

0.13

Correlation Coefficient

ITI  DiGiSPICE Technologies

Average diversification

The 3 months correlation between ITI and DiGiSPICE is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ITI Limited and DiGiSPICE Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiGiSPICE Technologies and ITI 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 ITI Limited are associated (or correlated) with DiGiSPICE Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiGiSPICE Technologies has no effect on the direction of ITI i.e., ITI and DiGiSPICE Technologies go up and down completely randomly.

Pair Corralation between ITI and DiGiSPICE Technologies

Assuming the 90 days trading horizon ITI Limited is expected to generate 1.99 times more return on investment than DiGiSPICE Technologies. However, ITI is 1.99 times more volatile than DiGiSPICE Technologies Limited. It trades about 0.2 of its potential returns per unit of risk. DiGiSPICE Technologies Limited is currently generating about 0.17 per unit of risk. If you would invest  36,810  in ITI Limited on October 8, 2024 and sell it today you would earn a total of  8,900  from holding ITI Limited or generate 24.18% return on investment over 90 days.

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

ITI Limited  vs.  DiGiSPICE Technologies Limited

ITI Limited

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ITI Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, ITI exhibited solid returns over the last few months and may actually be approaching a breakup point.

DiGiSPICE Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DiGiSPICE Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, DiGiSPICE Technologies is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ITI and DiGiSPICE Technologies

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

The idea behind ITI Limited and DiGiSPICE Technologies Limited 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.