Correlation Between Direct Capital and Imed Infinity

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

By analyzing existing cross correlation between Direct Capital Investments and Imed Infinity Medical Limited, you can compare the effects of market volatilities on Direct Capital and Imed Infinity 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 Direct Capital with a short position of Imed Infinity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Capital and Imed Infinity.

Diversification Opportunities for Direct Capital and Imed Infinity

0.45

Correlation Coefficient

Direct Capital  Imed Infinity

Very weak diversification

The 3 months correlation between Direct and Imed is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Direct Capital Investments and Imed Infinity Medical Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imed Infinity Medical and Direct Capital 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 Direct Capital Investments are associated (or correlated) with Imed Infinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imed Infinity Medical has no effect on the direction of Direct Capital i.e., Direct Capital and Imed Infinity go up and down completely randomly.

Pair Corralation between Direct Capital and Imed Infinity

Assuming the 90 days trading horizon Direct Capital Investments is expected to generate 3.27 times more return on investment than Imed Infinity. However, Direct Capital is 3.27 times more volatile than Imed Infinity Medical Limited. It trades about 0.06 of its potential returns per unit of risk. Imed Infinity Medical Limited is currently generating about 0.11 per unit of risk. If you would invest  84,990  in Direct Capital Investments on October 9, 2024 and sell it today you would earn a total of  2,010  from holding Direct Capital Investments or generate 2.36% return on investment over 90 days.

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

Direct Capital Investments  vs.  Imed Infinity Medical Limited

Direct Capital Inves

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direct Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Imed Infinity Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Imed Infinity Medical Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Imed Infinity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direct Capital and Imed Infinity

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

The idea behind Direct Capital Investments and Imed Infinity Medical 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.