Correlation Between ITI and Pilani Investment

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

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

Diversification Opportunities for ITI and Pilani Investment

-0.18

Correlation Coefficient

ITI  Pilani Investment

Good diversification

The 3 months correlation between ITI and Pilani is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding ITI Limited and Pilani Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilani Investment 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 Pilani Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilani Investment has no effect on the direction of ITI i.e., ITI and Pilani Investment go up and down completely randomly.

Pair Corralation between ITI and Pilani Investment

Assuming the 90 days trading horizon ITI Limited is expected to generate 3.61 times more return on investment than Pilani Investment. However, ITI is 3.61 times more volatile than Pilani Investment and. It trades about 0.21 of its potential returns per unit of risk. Pilani Investment and is currently generating about -0.4 per unit of risk. If you would invest  27,884  in ITI Limited on September 25, 2024 and sell it today you would earn a total of  6,226  from holding ITI Limited or generate 22.33% return on investment over 90 days.

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

ITI Limited  vs.  Pilani Investment and

ITI Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITI Limited are ranked lower than 7 (%) 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.

Pilani Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ITI and Pilani Investment

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

The idea behind ITI Limited and Pilani Investment and 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.