Correlation Between IBF Financial and CHC Healthcare

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

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

Diversification Opportunities for IBF Financial and CHC Healthcare

0.84

Correlation Coefficient

IBF Financial  CHC Healthcare

Very poor diversification

The 3 months correlation between IBF and CHC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding IBF Financial Holdings and CHC Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Healthcare Group and IBF Financial 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 IBF Financial Holdings are associated (or correlated) with CHC Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Healthcare Group has no effect on the direction of IBF Financial i.e., IBF Financial and CHC Healthcare go up and down completely randomly.

Pair Corralation between IBF Financial and CHC Healthcare

Assuming the 90 days trading horizon IBF Financial Holdings is expected to generate 0.64 times more return on investment than CHC Healthcare. However, IBF Financial Holdings is 1.56 times less risky than CHC Healthcare. It trades about -0.09 of its potential returns per unit of risk. CHC Healthcare Group is currently generating about -0.17 per unit of risk. If you would invest  1,565  in IBF Financial Holdings on September 17, 2024 and sell it today you would lose (60.00) from holding IBF Financial Holdings or give up 3.83% of portfolio value over 90 days.

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

IBF Financial Holdings  vs.  CHC Healthcare Group

IBF Financial Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IBF Financial Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IBF Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CHC Healthcare Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHC Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CHC Healthcare is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IBF Financial and CHC Healthcare

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

The idea behind IBF Financial Holdings and CHC Healthcare Group 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.