Correlation Between Moderna and ITM Power
Can any of the company-specific risk be diversified away by investing in both Moderna 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 Moderna and ITM Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moderna and ITM Power Plc, you can compare the effects of market volatilities on Moderna 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 Moderna with a short position of ITM Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderna and ITM Power.
Diversification Opportunities for Moderna and ITM Power
Very poor diversification
The 3 months correlation between Moderna and ITM is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Moderna 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 Moderna 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 Moderna 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 Moderna i.e., Moderna and ITM Power go up and down completely randomly.
Pair Corralation between Moderna and ITM Power
Assuming the 90 days horizon Moderna is expected to under-perform the ITM Power. But the stock apears to be less risky and, when comparing its historical volatility, Moderna is 1.18 times less risky than ITM Power. The stock trades about -0.07 of its potential returns per unit of risk. The ITM Power Plc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 112.00 in ITM Power Plc on September 3, 2024 and sell it today you would lose (72.00) from holding ITM Power Plc or give up 64.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moderna vs. ITM Power Plc
Performance |
| Timeline |
| Moderna |
| ITM Power Plc |
Moderna and ITM Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moderna and ITM Power
The main advantage of trading using opposite Moderna and ITM Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderna 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 Moderna 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.| ITM Power vs. Hon Hai Precision | ITM Power vs. Samsung SDI Co | ITM Power vs. Murata Manufacturing Co | ITM Power vs. Mitsubishi Electric |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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