Correlation Between ITM Power and CVD Equipment
Can any of the company-specific risk be diversified away by investing in both ITM Power and CVD Equipment 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 CVD Equipment 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 CVD Equipment, you can compare the effects of market volatilities on ITM Power and CVD Equipment 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 CVD Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITM Power and CVD Equipment.
Diversification Opportunities for ITM Power and CVD Equipment
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ITM and CVD is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ITM Power Plc and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment 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 CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of ITM Power i.e., ITM Power and CVD Equipment go up and down completely randomly.
Pair Corralation between ITM Power and CVD Equipment
Assuming the 90 days horizon ITM Power Plc is expected to under-perform the CVD Equipment. But the pink sheet apears to be less risky and, when comparing its historical volatility, ITM Power Plc is 1.15 times less risky than CVD Equipment. The pink sheet trades about -0.24 of its potential returns per unit of risk. The CVD Equipment is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 295.00 in CVD Equipment on September 2, 2024 and sell it today you would earn a total of 24.00 from holding CVD Equipment or generate 8.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITM Power Plc vs. CVD Equipment
Performance |
| Timeline |
| ITM Power Plc |
| CVD Equipment |
ITM Power and CVD Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITM Power and CVD Equipment
The main advantage of trading using opposite ITM Power and CVD Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITM Power position performs unexpectedly, CVD Equipment 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 CVD Equipment will offset losses from the drop in CVD Equipment's long position.| ITM Power vs. Next Hydrogen Solutions | ITM Power vs. Nel ASA | ITM Power vs. Titan Logix Corp | ITM Power vs. Weir Group PLC |
| CVD Equipment vs. NXP Semiconductors NV | CVD Equipment vs. GSI Technology | CVD Equipment vs. MaxLinear | CVD Equipment vs. Texas Instruments Incorporated |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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