Correlation Between LT Technology and NIIT

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Can any of the company-specific risk be diversified away by investing in both LT Technology and NIIT 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 LT Technology and NIIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LT Technology Services and NIIT Limited, you can compare the effects of market volatilities on LT Technology and NIIT 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 LT Technology with a short position of NIIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of LT Technology and NIIT.

Diversification Opportunities for LT Technology and NIIT

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between LTTS and NIIT is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding LT Technology Services and NIIT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIIT Limited and LT Technology 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 LT Technology Services are associated (or correlated) with NIIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIIT Limited has no effect on the direction of LT Technology i.e., LT Technology and NIIT go up and down completely randomly.

Pair Corralation between LT Technology and NIIT

Assuming the 90 days trading horizon LT Technology is expected to generate 1.17 times less return on investment than NIIT. But when comparing it to its historical volatility, LT Technology Services is 2.94 times less risky than NIIT. It trades about 0.05 of its potential returns per unit of risk. NIIT Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  30,964  in NIIT Limited on September 20, 2024 and sell it today you would lose (10,854) from holding NIIT Limited or give up 35.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

LT Technology Services  vs.  NIIT Limited

 Performance 
       Timeline  
LT Technology Services 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LT Technology Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, LT Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
NIIT Limited 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in NIIT Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, NIIT exhibited solid returns over the last few months and may actually be approaching a breakup point.

LT Technology and NIIT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LT Technology and NIIT

The main advantage of trading using opposite LT Technology and NIIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LT Technology position performs unexpectedly, NIIT 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 NIIT will offset losses from the drop in NIIT's long position.
The idea behind LT Technology Services and NIIT Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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