Correlation Between Quality Industrial and ITM Power

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

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

Diversification Opportunities for Quality Industrial and ITM Power

0.57

Correlation Coefficient

Quality Industrial  ITM Power

Very weak diversification

The 3 months correlation between Quality and ITM is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Quality Industrial Corp and ITM Power Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power Plc and Quality Industrial 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 Quality Industrial Corp are associated (or correlated) with ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power Plc has no effect on the direction of Quality Industrial i.e., Quality Industrial and ITM Power go up and down completely randomly.

Pair Corralation between Quality Industrial and ITM Power

Given the investment horizon of 90 days Quality Industrial Corp is expected to under-perform the ITM Power. In addition to that, Quality Industrial is 2.07 times more volatile than ITM Power Plc. It trades about -0.13 of its total potential returns per unit of risk. ITM Power Plc is currently generating about -0.01 per unit of volatility. If you would invest  41.00  in ITM Power Plc on December 28, 2024 and sell it today you would lose (4.00) from holding ITM Power Plc or give up 9.76% of portfolio value over 90 days.

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

Quality Industrial Corp  vs.  ITM Power Plc

Quality Industrial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quality Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic 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.

ITM Power Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITM Power Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITM Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Quality Industrial and ITM Power

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

The idea behind Quality Industrial Corp and ITM Power Plc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.