Correlation Between ICD and Humasis Co

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

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

Diversification Opportunities for ICD and Humasis Co

-0.12

Correlation Coefficient

ICD  Humasis Co

Good diversification

The 3 months correlation between ICD and Humasis is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding ICD Co and Humasis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humasis Co and ICD 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 ICD Co are associated (or correlated) with Humasis Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humasis Co has no effect on the direction of ICD i.e., ICD and Humasis Co go up and down completely randomly.

Pair Corralation between ICD and Humasis Co

Assuming the 90 days trading horizon ICD Co is expected to generate 1.95 times more return on investment than Humasis Co. However, ICD is 1.95 times more volatile than Humasis Co. It trades about 0.01 of its potential returns per unit of risk. Humasis Co is currently generating about -0.05 per unit of risk. If you would invest  605,000  in ICD Co on December 2, 2024 and sell it today you would lose (4,000) from holding ICD Co or give up 0.66% of portfolio value over 90 days.

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

ICD Co  vs.  Humasis Co

ICD Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICD Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ICD sustained solid returns over the last few months and may actually be approaching a breakup point.

Humasis Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Humasis Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Humasis Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICD and Humasis Co

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

The idea behind ICD Co and Humasis 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.