Correlation Between IBL HealthCare and JS Global

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

By analyzing existing cross correlation between IBL HealthCare and JS Global Banking, you can compare the effects of market volatilities on IBL HealthCare and JS Global 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 JS Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBL HealthCare and JS Global.

Diversification Opportunities for IBL HealthCare and JS Global

0.78

Correlation Coefficient

IBL HealthCare  JS Global

Poor diversification

The 3 months correlation between IBL and JSGBETF is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding IBL HealthCare and JS Global Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Global Banking 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 JS Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Global Banking has no effect on the direction of IBL HealthCare i.e., IBL HealthCare and JS Global go up and down completely randomly.

Pair Corralation between IBL HealthCare and JS Global

Assuming the 90 days trading horizon IBL HealthCare is expected to generate 1.24 times more return on investment than JS Global. However, IBL HealthCare is 1.24 times more volatile than JS Global Banking. It trades about 0.2 of its potential returns per unit of risk. JS Global Banking is currently generating about 0.12 per unit of risk. If you would invest  2,641  in IBL HealthCare on October 9, 2024 and sell it today you would earn a total of  1,587  from holding IBL HealthCare or generate 60.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

IBL HealthCare  vs.  JS Global Banking

IBL HealthCare

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IBL HealthCare are ranked lower than 15 (%) 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.

JS Global Banking

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JS Global Banking are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, JS Global reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IBL HealthCare and JS Global

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

The idea behind IBL HealthCare and JS Global Banking 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.