Correlation Between Power Finance and ITI
Can any of the company-specific risk be diversified away by investing in both Power Finance and ITI 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 Power Finance and ITI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Finance and ITI Limited, you can compare the effects of market volatilities on Power Finance and ITI 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 Power Finance with a short position of ITI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Finance and ITI.
Diversification Opportunities for Power Finance and ITI
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Power and ITI is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI Limited and Power Finance 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 Power Finance are associated (or correlated) with ITI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITI Limited has no effect on the direction of Power Finance i.e., Power Finance and ITI go up and down completely randomly.
Pair Corralation between Power Finance and ITI
Assuming the 90 days trading horizon Power Finance is expected to generate 0.99 times more return on investment than ITI. However, Power Finance is 1.01 times less risky than ITI. It trades about 0.11 of its potential returns per unit of risk. ITI Limited is currently generating about 0.09 per unit of risk. If you would invest 9,919 in Power Finance on September 14, 2024 and sell it today you would earn a total of 40,856 from holding Power Finance or generate 411.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Power Finance vs. ITI Limited
Performance |
| Timeline |
| Power Finance |
| ITI Limited |
Power Finance and ITI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Finance and ITI
The main advantage of trading using opposite Power Finance and ITI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Finance position performs unexpectedly, ITI 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 ITI will offset losses from the drop in ITI's long position.| Power Finance vs. Reliance Industries Limited | Power Finance vs. HDFC Bank Limited | Power Finance vs. Kingfa Science Technology | Power Finance vs. Rico Auto Industries |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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