Correlation Between Impax Environmental and Primary Health

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

By analyzing existing cross correlation between Impax Environmental Markets and Primary Health Properties, you can compare the effects of market volatilities on Impax Environmental and Primary Health 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 Impax Environmental with a short position of Primary Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impax Environmental and Primary Health.

Diversification Opportunities for Impax Environmental and Primary Health

-0.43

Correlation Coefficient

Impax Environmental  Primary Health

Very good diversification

The 3 months correlation between Impax and Primary is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Impax Environmental Markets and Primary Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primary Health Properties and Impax Environmental 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 Impax Environmental Markets are associated (or correlated) with Primary Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primary Health Properties has no effect on the direction of Impax Environmental i.e., Impax Environmental and Primary Health go up and down completely randomly.

Pair Corralation between Impax Environmental and Primary Health

Assuming the 90 days trading horizon Impax Environmental Markets is expected to under-perform the Primary Health. But the stock apears to be less risky and, when comparing its historical volatility, Impax Environmental Markets is 1.46 times less risky than Primary Health. The stock trades about -0.05 of its potential returns per unit of risk. The Primary Health Properties is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,133  in Primary Health Properties on December 22, 2024 and sell it today you would earn a total of  502.00  from holding Primary Health Properties or generate 5.5% return on investment over 90 days.

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

Impax Environmental Markets  vs.  Primary Health Properties

Impax Environmental

Risk-Adjusted Performance

Very Weak

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

Primary Health Properties

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Primary Health Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Primary Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Impax Environmental and Primary Health

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

The idea behind Impax Environmental Markets and Primary Health Properties 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.