Correlation Between Kusama and ITC

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

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

Diversification Opportunities for Kusama and ITC

0.08

Correlation Coefficient

Kusama  ITC

Significant diversification

The 3 months correlation between Kusama and ITC is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kusama and ITC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITC and Kusama 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 Kusama are associated (or correlated) with ITC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITC has no effect on the direction of Kusama i.e., Kusama and ITC go up and down completely randomly.

Pair Corralation between Kusama and ITC

If you would invest  1,818  in Kusama on August 30, 2024 and sell it today you would earn a total of  1,930  from holding Kusama or generate 106.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Kusama  vs.  ITC

Kusama

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kusama are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Kusama exhibited solid returns over the last few months and may actually be approaching a breakup point.

ITC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kusama and ITC

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

The idea behind Kusama and ITC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.