Correlation Between Cepton and Itron
Can any of the company-specific risk be diversified away by investing in both Cepton and Itron 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 Cepton and Itron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cepton Inc and Itron Inc, you can compare the effects of market volatilities on Cepton and Itron 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 Cepton with a short position of Itron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cepton and Itron.
Diversification Opportunities for Cepton and Itron
Very weak diversification
The 3 months correlation between Cepton and Itron is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cepton Inc and Itron Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itron Inc and Cepton 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 Cepton Inc are associated (or correlated) with Itron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itron Inc has no effect on the direction of Cepton i.e., Cepton and Itron go up and down completely randomly.
Pair Corralation between Cepton and Itron
Given the investment horizon of 90 days Cepton Inc is expected to under-perform the Itron. But the stock apears to be less risky and, when comparing its historical volatility, Cepton Inc is 5.78 times less risky than Itron. The stock trades about -0.04 of its potential returns per unit of risk. The Itron Inc is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 10,386 in Itron Inc on August 31, 2024 and sell it today you would earn a total of 1,543 from holding Itron Inc or generate 14.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cepton Inc vs. Itron Inc
Performance |
| Timeline |
| Cepton Inc |
| Itron Inc |
Cepton and Itron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cepton and Itron
The main advantage of trading using opposite Cepton and Itron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cepton position performs unexpectedly, Itron 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 Itron will offset losses from the drop in Itron's long position.The idea behind Cepton Inc and Itron Inc 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 CEOs Directory module to screen CEOs from public companies around the world.
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