Correlation Between Cots Technology and ITM Semiconductor

Can any of the company-specific risk be diversified away by investing in both Cots Technology and ITM Semiconductor 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 Cots Technology and ITM Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cots Technology Co and ITM Semiconductor Co, you can compare the effects of market volatilities on Cots Technology and ITM Semiconductor 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 Cots Technology with a short position of ITM Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cots Technology and ITM Semiconductor.

Diversification Opportunities for Cots Technology and ITM Semiconductor

0.34

Correlation Coefficient

Cots Technology  ITM Semiconductor

Weak diversification

The 3 months correlation between Cots and ITM is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cots Technology Co and ITM Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Semiconductor and Cots 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 Cots Technology Co are associated (or correlated) with ITM Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Semiconductor has no effect on the direction of Cots Technology i.e., Cots Technology and ITM Semiconductor go up and down completely randomly.

Pair Corralation between Cots Technology and ITM Semiconductor

Assuming the 90 days trading horizon Cots Technology Co is expected to generate 1.65 times more return on investment than ITM Semiconductor. However, Cots Technology is 1.65 times more volatile than ITM Semiconductor Co. It trades about -0.09 of its potential returns per unit of risk. ITM Semiconductor Co is currently generating about -0.37 per unit of risk. If you would invest  1,772,000  in Cots Technology Co on September 12, 2024 and sell it today you would lose (373,000) from holding Cots Technology Co or give up 21.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cots Technology Co  vs.  ITM Semiconductor Co

Cots Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cots Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ITM Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITM Semiconductor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cots Technology and ITM Semiconductor

The main advantage of trading using opposite Cots Technology and ITM Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cots Technology position performs unexpectedly, ITM Semiconductor 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 ITM Semiconductor will offset losses from the drop in ITM Semiconductor's long position.

The idea behind Cots Technology Co and ITM Semiconductor Co 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.