Correlation Between IBL HealthCare and Roshan Packages

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

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

Diversification Opportunities for IBL HealthCare and Roshan Packages

0.9

Correlation Coefficient

IBL HealthCare  Roshan Packages

Almost no diversification

The 3 months correlation between IBL and Roshan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding IBL HealthCare and Roshan Packages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roshan Packages 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 Roshan Packages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roshan Packages has no effect on the direction of IBL HealthCare i.e., IBL HealthCare and Roshan Packages go up and down completely randomly.

Pair Corralation between IBL HealthCare and Roshan Packages

Assuming the 90 days trading horizon IBL HealthCare is expected to under-perform the Roshan Packages. In addition to that, IBL HealthCare is 1.28 times more volatile than Roshan Packages. It trades about -0.05 of its total potential returns per unit of risk. Roshan Packages is currently generating about -0.04 per unit of volatility. If you would invest  1,890  in Roshan Packages on October 10, 2024 and sell it today you would lose (79.00) from holding Roshan Packages or give up 4.18% of portfolio value over 90 days.

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

IBL HealthCare  vs.  Roshan Packages

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.

Roshan Packages

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Roshan Packages are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Roshan Packages reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IBL HealthCare and Roshan Packages

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

The idea behind IBL HealthCare and Roshan Packages 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.