Correlation Between Associated British and ITM Power
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and ITM Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and ITM Power, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of ITM Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and ITM Power.
Diversification Opportunities for Associated British and ITM Power
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Associated and ITM is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and ITM Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power and Associated British 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 Associated British Foods 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 has no effect on the direction of Associated British i.e., Associated British and ITM Power go up and down completely randomly.
Pair Corralation between Associated British and ITM Power
Assuming the 90 days trading horizon Associated British Foods is expected to generate 0.36 times more return on investment than ITM Power. However, Associated British Foods is 2.74 times less risky than ITM Power. It trades about -0.15 of its potential returns per unit of risk. ITM Power is currently generating about -0.28 per unit of risk. If you would invest 228,900 in Associated British Foods on September 3, 2024 and sell it today you would lose (9,100) from holding Associated British Foods or give up 3.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. ITM Power
Performance |
| Timeline |
| Associated British Foods |
| ITM Power |
Associated British and ITM Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and ITM Power
The main advantage of trading using opposite Associated British and ITM Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. National Beverage Corp | Associated British vs. Solstad Offshore ASA | Associated British vs. Ashtead Technology Holdings | Associated British vs. Playtech Plc |
| ITM Power vs. Tyson Foods Cl | ITM Power vs. Westlake Chemical Corp | ITM Power vs. Associated British Foods | ITM Power vs. Aeorema Communications Plc |
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 CEOs Directory module to screen CEOs from public companies around the world.
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