Correlation Between Digistar Bhd and IHH Healthcare

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

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

Diversification Opportunities for Digistar Bhd and IHH Healthcare

0.01

Correlation Coefficient

Digistar Bhd  IHH Healthcare

Significant diversification

The 3 months correlation between Digistar and IHH is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Digistar Bhd and IHH Healthcare Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHH Healthcare Bhd and Digistar Bhd 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 Digistar Bhd are associated (or correlated) with IHH Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHH Healthcare Bhd has no effect on the direction of Digistar Bhd i.e., Digistar Bhd and IHH Healthcare go up and down completely randomly.

Pair Corralation between Digistar Bhd and IHH Healthcare

Assuming the 90 days trading horizon Digistar Bhd is expected to under-perform the IHH Healthcare. In addition to that, Digistar Bhd is 6.94 times more volatile than IHH Healthcare Bhd. It trades about -0.03 of its total potential returns per unit of risk. IHH Healthcare Bhd is currently generating about 0.02 per unit of volatility. If you would invest  726.00  in IHH Healthcare Bhd on November 29, 2024 and sell it today you would earn a total of  4.00  from holding IHH Healthcare Bhd or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Digistar Bhd  vs.  IHH Healthcare Bhd

Digistar Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digistar Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

IHH Healthcare Bhd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IHH Healthcare Bhd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, IHH Healthcare is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Digistar Bhd and IHH Healthcare

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

The idea behind Digistar Bhd and IHH Healthcare Bhd 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.