Correlation Between ITI and Motisons Jewellers

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

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

Diversification Opportunities for ITI and Motisons Jewellers

-0.19

Correlation Coefficient

ITI  Motisons Jewellers

Good diversification

The 3 months correlation between ITI and Motisons is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ITI Limited and Motisons Jewellers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motisons Jewellers 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 Motisons Jewellers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motisons Jewellers has no effect on the direction of ITI i.e., ITI and Motisons Jewellers go up and down completely randomly.

Pair Corralation between ITI and Motisons Jewellers

Assuming the 90 days trading horizon ITI is expected to generate 1.48 times less return on investment than Motisons Jewellers. But when comparing it to its historical volatility, ITI Limited is 1.09 times less risky than Motisons Jewellers. It trades about 0.09 of its potential returns per unit of risk. Motisons Jewellers is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,035  in Motisons Jewellers on September 20, 2024 and sell it today you would earn a total of  1,687  from holding Motisons Jewellers or generate 163.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.79%
Values	Daily Returns

ITI Limited  vs.  Motisons Jewellers

ITI Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITI Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ITI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Motisons Jewellers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Motisons Jewellers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Motisons Jewellers is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ITI and Motisons Jewellers

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

The idea behind ITI Limited and Motisons Jewellers 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.