Correlation Between ITM Power and Moderna
Can any of the company-specific risk be diversified away by investing in both ITM Power and Moderna 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 ITM Power and Moderna into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITM Power Plc and Moderna, you can compare the effects of market volatilities on ITM Power and Moderna 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 ITM Power with a short position of Moderna. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITM Power and Moderna.
Diversification Opportunities for ITM Power and Moderna
Very poor diversification
The 3 months correlation between ITM and Moderna is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ITM Power Plc and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna and ITM Power 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 ITM Power Plc are associated (or correlated) with Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of ITM Power i.e., ITM Power and Moderna go up and down completely randomly.
Pair Corralation between ITM Power and Moderna
Assuming the 90 days horizon ITM Power Plc is expected to generate 1.18 times more return on investment than Moderna. However, ITM Power is 1.18 times more volatile than Moderna. It trades about -0.03 of its potential returns per unit of risk. Moderna is currently generating about -0.07 per unit of risk. 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 |
ITM Power Plc vs. Moderna
Performance |
| Timeline |
| ITM Power Plc |
| Moderna |
ITM Power and Moderna Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITM Power and Moderna
The main advantage of trading using opposite ITM Power and Moderna positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITM Power position performs unexpectedly, Moderna 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 Moderna will offset losses from the drop in Moderna's long position.| 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 Stocks Directory module to find actively traded stocks across global markets.
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