Correlation Between ITC and Shrapnel

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

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

Diversification Opportunities for ITC and Shrapnel

-0.66

Correlation Coefficient

ITC  Shrapnel

Excellent diversification

The 3 months correlation between ITC and Shrapnel is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding ITC and Shrapnel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shrapnel and ITC 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 ITC are associated (or correlated) with Shrapnel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shrapnel has no effect on the direction of ITC i.e., ITC and Shrapnel go up and down completely randomly.

Pair Corralation between ITC and Shrapnel

If you would invest  0.98  in ITC on February 6, 2024 and sell it today you would earn a total of  0.00  from holding ITC or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

ITC  vs.  Shrapnel

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.

Shrapnel

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with ITC and Shrapnel

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

The idea behind ITC and Shrapnel 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.