Correlation Between Shaily Engineering and ITI

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

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

Diversification Opportunities for Shaily Engineering and ITI

0.76

Correlation Coefficient

Shaily Engineering  ITI

Poor diversification

The 3 months correlation between Shaily and ITI is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shaily Engineering Plastics and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI Limited and Shaily Engineering 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 Shaily Engineering Plastics are associated (or correlated) with ITI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITI Limited has no effect on the direction of Shaily Engineering i.e., Shaily Engineering and ITI go up and down completely randomly.

Pair Corralation between Shaily Engineering and ITI

Assuming the 90 days trading horizon Shaily Engineering is expected to generate 2.22 times less return on investment than ITI. But when comparing it to its historical volatility, Shaily Engineering Plastics is 2.65 times less risky than ITI. It trades about 0.12 of its potential returns per unit of risk. ITI Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  34,110  in ITI Limited on October 22, 2024 and sell it today you would earn a total of  3,500  from holding ITI Limited or generate 10.26% return on investment over 90 days.

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

Shaily Engineering Plastics  vs.  ITI Limited

Shaily Engineering

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

ITI Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ITI Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, ITI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shaily Engineering and ITI

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

The idea behind Shaily Engineering Plastics and ITI Limited 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.