Correlation Between Intal High and Government High

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

By analyzing existing cross correlation between Intal High Relative and Government High Quality, you can compare the effects of market volatilities on Intal High and Government High 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 Intal High with a short position of Government High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intal High and Government High.

Diversification Opportunities for Intal High and Government High

0.8

Correlation Coefficient

Intal High  Government High

Very poor diversification

The 3 months correlation between Intal and Government is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Intal High Relative and Government High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government High Quality and Intal High 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 Intal High Relative are associated (or correlated) with Government High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government High Quality has no effect on the direction of Intal High i.e., Intal High and Government High go up and down completely randomly.

Pair Corralation between Intal High and Government High

Assuming the 90 days horizon Intal High Relative is expected to under-perform the Government High. In addition to that, Intal High is 2.35 times more volatile than Government High Quality. It trades about -0.05 of its total potential returns per unit of risk. Government High Quality is currently generating about -0.11 per unit of volatility. If you would invest  923.00  in Government High Quality on September 12, 2024 and sell it today you would lose (22.00) from holding Government High Quality or give up 2.38% of portfolio value over 90 days.

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

Intal High Relative  vs.  Government High Quality

Intal High Relative

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intal High Relative has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Intal High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Government High Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Government High Quality has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Government High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intal High and Government High

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

The idea behind Intal High Relative and Government High Quality 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.