Correlation Between First and Inspiration Healthcare

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

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

Diversification Opportunities for First and Inspiration Healthcare

0.23

Correlation Coefficient

First  Inspiration Healthcare

Modest diversification

The 3 months correlation between First and Inspiration is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and Inspiration Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspiration Healthcare and First 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 First Class Metals are associated (or correlated) with Inspiration Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspiration Healthcare has no effect on the direction of First i.e., First and Inspiration Healthcare go up and down completely randomly.

Pair Corralation between First and Inspiration Healthcare

Assuming the 90 days trading horizon First Class Metals is expected to generate 2.27 times more return on investment than Inspiration Healthcare. However, First is 2.27 times more volatile than Inspiration Healthcare Group. It trades about -0.02 of its potential returns per unit of risk. Inspiration Healthcare Group is currently generating about -0.34 per unit of risk. If you would invest  195.00  in First Class Metals on October 7, 2024 and sell it today you would lose (15.00) from holding First Class Metals or give up 7.69% of portfolio value over 90 days.

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

First Class Metals  vs.  Inspiration Healthcare Group

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Class Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Inspiration Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspiration Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with First and Inspiration Healthcare

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

The idea behind First Class Metals and Inspiration 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.