Correlation Between EPSILON HEALTHCARE and IMPERIAL TOBACCO

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

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

Diversification Opportunities for EPSILON HEALTHCARE and IMPERIAL TOBACCO

0.0

Correlation Coefficient

EPSILON HEALTHCARE  IMPERIAL TOBACCO

Pay attention - limited upside

The 3 months correlation between EPSILON and IMPERIAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EPSILON HEALTHCARE LTD and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO and EPSILON HEALTHCARE 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 EPSILON HEALTHCARE LTD are associated (or correlated) with IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of EPSILON HEALTHCARE i.e., EPSILON HEALTHCARE and IMPERIAL TOBACCO go up and down completely randomly.

Pair Corralation between EPSILON HEALTHCARE and IMPERIAL TOBACCO

Assuming the 90 days trading horizon EPSILON HEALTHCARE LTD is expected to generate 12.58 times more return on investment than IMPERIAL TOBACCO. However, EPSILON HEALTHCARE is 12.58 times more volatile than IMPERIAL TOBACCO . It trades about 0.05 of its potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.08 per unit of risk. If you would invest  1.05  in EPSILON HEALTHCARE LTD on October 4, 2024 and sell it today you would lose (0.30) from holding EPSILON HEALTHCARE LTD or give up 28.57% of portfolio value over 90 days.

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

EPSILON HEALTHCARE LTD  vs.  IMPERIAL TOBACCO

EPSILON HEALTHCARE LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EPSILON HEALTHCARE LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, EPSILON HEALTHCARE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

IMPERIAL TOBACCO

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, IMPERIAL TOBACCO unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EPSILON HEALTHCARE and IMPERIAL TOBACCO

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

The idea behind EPSILON HEALTHCARE LTD and IMPERIAL TOBACCO 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.