Correlation Between IBL HealthCare and East West

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Can any of the company-specific risk be diversified away by investing in both IBL HealthCare and East West 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 IBL HealthCare and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IBL HealthCare and East West Insurance, you can compare the effects of market volatilities on IBL HealthCare and East West 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 IBL HealthCare with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBL HealthCare and East West.

Diversification Opportunities for IBL HealthCare and East West

IBLEastDiversified AwayIBLEastDiversified Away100%
-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between IBL and East is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding IBL HealthCare and East West Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Insurance and IBL 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 IBL HealthCare are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Insurance has no effect on the direction of IBL HealthCare i.e., IBL HealthCare and East West go up and down completely randomly.

Pair Corralation between IBL HealthCare and East West

Assuming the 90 days trading horizon IBL HealthCare is expected to generate 1.12 times more return on investment than East West. However, IBL HealthCare is 1.12 times more volatile than East West Insurance. It trades about 0.16 of its potential returns per unit of risk. East West Insurance is currently generating about 0.15 per unit of risk. If you would invest  3,134  in IBL HealthCare on September 15, 2024 and sell it today you would earn a total of  1,330  from holding IBL HealthCare or generate 42.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy76.56%
ValuesDaily Returns

IBL HealthCare  vs.  East West Insurance

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -20-10010203040
JavaScript chart by amCharts 3.21.15IBLHL EWIC
       Timeline  
IBL HealthCare 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in IBL HealthCare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, IBL HealthCare disclosed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec30354045
East West Insurance 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in East West Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East West sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15JulAugOctNovDecAugOctNovDec35404550

IBL HealthCare and East West Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-11.48-8.6-5.72-2.830.03.016.129.2412.3515.47 0.0100.0150.0200.025
JavaScript chart by amCharts 3.21.15IBLHL EWIC
       Returns  

Pair Trading with IBL HealthCare and East West

The main advantage of trading using opposite IBL HealthCare and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IBL HealthCare position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.
The idea behind IBL HealthCare and East West Insurance 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.

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