Correlation Between IG Petrochemicals and Fortis Healthcare

Can any of the company-specific risk be diversified away by investing in both IG Petrochemicals and Fortis Healthcare 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 IG Petrochemicals and Fortis Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IG Petrochemicals Limited and Fortis Healthcare Limited, you can compare the effects of market volatilities on IG Petrochemicals and Fortis Healthcare 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 IG Petrochemicals with a short position of Fortis Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of IG Petrochemicals and Fortis Healthcare.

Diversification Opportunities for IG Petrochemicals and Fortis Healthcare

0.84

Correlation Coefficient

IG Petrochemicals  Fortis Healthcare

Very poor diversification

The 3 months correlation between IGPL and Fortis is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding IG Petrochemicals Limited and Fortis Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Healthcare and IG Petrochemicals 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 IG Petrochemicals Limited are associated (or correlated) with Fortis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Healthcare has no effect on the direction of IG Petrochemicals i.e., IG Petrochemicals and Fortis Healthcare go up and down completely randomly.

Pair Corralation between IG Petrochemicals and Fortis Healthcare

Assuming the 90 days trading horizon IG Petrochemicals Limited is expected to under-perform the Fortis Healthcare. In addition to that, IG Petrochemicals is 1.07 times more volatile than Fortis Healthcare Limited. It trades about -0.13 of its total potential returns per unit of risk. Fortis Healthcare Limited is currently generating about -0.04 per unit of volatility. If you would invest  67,890  in Fortis Healthcare Limited on December 23, 2024 and sell it today you would lose (5,065) from holding Fortis Healthcare Limited or give up 7.46% of portfolio value over 90 days.

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

IG Petrochemicals Limited  vs.  Fortis Healthcare Limited

IG Petrochemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days IG Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Fortis Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortis Healthcare Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fortis Healthcare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IG Petrochemicals and Fortis Healthcare

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

The idea behind IG Petrochemicals Limited and Fortis Healthcare Limited 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.