Correlation Between ITI and Hilton Metal

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

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

Diversification Opportunities for ITI and Hilton Metal

0.87

Correlation Coefficient

ITI  Hilton Metal

Very poor diversification

The 3 months correlation between ITI and Hilton is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ITI Limited and Hilton Metal Forging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Metal Forging 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 Hilton Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Metal Forging has no effect on the direction of ITI i.e., ITI and Hilton Metal go up and down completely randomly.

Pair Corralation between ITI and Hilton Metal

Assuming the 90 days trading horizon ITI Limited is expected to under-perform the Hilton Metal. In addition to that, ITI is 1.12 times more volatile than Hilton Metal Forging. It trades about -0.11 of its total potential returns per unit of risk. Hilton Metal Forging is currently generating about -0.09 per unit of volatility. If you would invest  9,864  in Hilton Metal Forging on December 30, 2024 and sell it today you would lose (2,748) from holding Hilton Metal Forging or give up 27.86% of portfolio value over 90 days.

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

ITI Limited  vs.  Hilton Metal Forging

ITI Limited

Risk-Adjusted Performance

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 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hilton Metal Forging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hilton Metal Forging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ITI and Hilton Metal

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

The idea behind ITI Limited and Hilton Metal Forging 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.