Correlation Between Definity Financial and Quipt Home

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

By analyzing existing cross correlation between Definity Financial Corp and Quipt Home Medical, you can compare the effects of market volatilities on Definity Financial and Quipt Home 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 Definity Financial with a short position of Quipt Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Definity Financial and Quipt Home.

Diversification Opportunities for Definity Financial and Quipt Home

-0.07

Correlation Coefficient

Definity Financial  Quipt Home

Good diversification

The 3 months correlation between Definity and Quipt is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp and Quipt Home Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quipt Home Medical and Definity 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 Definity Financial Corp are associated (or correlated) with Quipt Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quipt Home Medical has no effect on the direction of Definity Financial i.e., Definity Financial and Quipt Home go up and down completely randomly.

Pair Corralation between Definity Financial and Quipt Home

Assuming the 90 days trading horizon Definity Financial Corp is expected to under-perform the Quipt Home. But the stock apears to be less risky and, when comparing its historical volatility, Definity Financial Corp is 8.49 times less risky than Quipt Home. The stock trades about -0.14 of its potential returns per unit of risk. The Quipt Home Medical is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  391.00  in Quipt Home Medical on October 8, 2024 and sell it today you would earn a total of  46.00  from holding Quipt Home Medical or generate 11.76% return on investment over 90 days.

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

Definity Financial Corp  vs.  Quipt Home Medical

Definity Financial Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Definity Financial Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Definity Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Quipt Home Medical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quipt Home Medical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Quipt Home displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Definity Financial and Quipt Home

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

The idea behind Definity Financial Corp and Quipt Home Medical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.