Correlation Between ITC and JNT
Can any of the company-specific risk be diversified away by investing in both ITC and JNT 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 JNT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITC and JNT, you can compare the effects of market volatilities on ITC and JNT 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 JNT. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITC and JNT.
Diversification Opportunities for ITC and JNT
No risk reduction
The 3 months correlation between ITC and JNT is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding ITC and JNT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JNT 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 JNT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JNT has no effect on the direction of ITC i.e., ITC and JNT go up and down completely randomly.
Pair Corralation between ITC and JNT
Assuming the 90 days trading horizon ITC is expected to generate 1.0 times less return on investment than JNT. In addition to that, ITC is 1.02 times more volatile than JNT. It trades about 0.13 of its total potential returns per unit of risk. JNT is currently generating about 0.13 per unit of volatility. If you would invest 5.31 in JNT on August 25, 2024 and sell it today you would earn a total of 3.96 from holding JNT or generate 74.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITC vs. JNT
Performance |
| Timeline |
| ITC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| JNT |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ITC and JNT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITC and JNT
The main advantage of trading using opposite ITC and JNT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITC position performs unexpectedly, JNT 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 JNT will offset losses from the drop in JNT's long position.The idea behind ITC and JNT 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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