Correlation Between ITI and Diligent Media

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

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

Diversification Opportunities for ITI and Diligent Media

0.67

Correlation Coefficient

ITI  Diligent Media

Poor diversification

The 3 months correlation between ITI and Diligent is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ITI Limited and Diligent Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diligent Media 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 Diligent Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diligent Media has no effect on the direction of ITI i.e., ITI and Diligent Media go up and down completely randomly.

Pair Corralation between ITI and Diligent Media

Assuming the 90 days trading horizon ITI Limited is expected to generate 1.39 times more return on investment than Diligent Media. However, ITI is 1.39 times more volatile than Diligent Media. It trades about 0.0 of its potential returns per unit of risk. Diligent Media is currently generating about -0.11 per unit of risk. If you would invest  30,260  in ITI Limited on September 2, 2024 and sell it today you would lose (1,597) from holding ITI Limited or give up 5.28% of portfolio value over 90 days.

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

ITI Limited  vs.  Diligent Media

ITI Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITI Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ITI is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Diligent Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diligent Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with ITI and Diligent Media

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

The idea behind ITI Limited and Diligent Media 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.