Correlation Between IBL HealthCare and Murree Brewery

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

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

Diversification Opportunities for IBL HealthCare and Murree Brewery

0.88

Correlation Coefficient

IBL HealthCare  Murree Brewery

Very poor diversification

The 3 months correlation between IBL and Murree is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding IBL HealthCare and Murree Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murree Brewery 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 Murree Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murree Brewery has no effect on the direction of IBL HealthCare i.e., IBL HealthCare and Murree Brewery go up and down completely randomly.

Pair Corralation between IBL HealthCare and Murree Brewery

Assuming the 90 days trading horizon IBL HealthCare is expected to under-perform the Murree Brewery. In addition to that, IBL HealthCare is 1.87 times more volatile than Murree Brewery. It trades about -0.04 of its total potential returns per unit of risk. Murree Brewery is currently generating about 0.28 per unit of volatility. If you would invest  70,441  in Murree Brewery on October 11, 2024 and sell it today you would earn a total of  9,918  from holding Murree Brewery or generate 14.08% return on investment over 90 days.

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

IBL HealthCare  vs.  Murree Brewery

IBL HealthCare

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IBL HealthCare are ranked lower than 14 (%) 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.

Murree Brewery

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Murree Brewery are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Murree Brewery disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IBL HealthCare and Murree Brewery

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

The idea behind IBL HealthCare and Murree Brewery 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.