Correlation Between ITI and Exide Industries

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

By analyzing existing cross correlation between ITI Limited and Exide Industries Limited, you can compare the effects of market volatilities on ITI and Exide Industries 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 ITI with a short position of Exide Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITI and Exide Industries.

Diversification Opportunities for ITI and Exide Industries

-0.19

Correlation Coefficient

ITI  Exide Industries

Good diversification

The 3 months correlation between ITI and Exide is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ITI Limited and Exide Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exide Industries and ITI 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 ITI Limited are associated (or correlated) with Exide Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exide Industries has no effect on the direction of ITI i.e., ITI and Exide Industries go up and down completely randomly.

Pair Corralation between ITI and Exide Industries

Assuming the 90 days trading horizon ITI Limited is expected to generate 1.75 times more return on investment than Exide Industries. However, ITI is 1.75 times more volatile than Exide Industries Limited. It trades about 0.01 of its potential returns per unit of risk. Exide Industries Limited is currently generating about -0.04 per unit of risk. If you would invest  30,260  in ITI Limited on August 31, 2024 and sell it today you would lose (693.00) from holding ITI Limited or give up 2.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

ITI Limited  vs.  Exide Industries Limited

ITI Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITI Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ITI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Exide Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exide Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Exide Industries is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ITI and Exide Industries

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

The idea behind ITI Limited and Exide Industries 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.