Correlation Between Inspiration Healthcare and Boston Properties

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

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

Diversification Opportunities for Inspiration Healthcare and Boston Properties

-0.65

Correlation Coefficient

Inspiration Healthcare  Boston Properties

Excellent diversification

The 3 months correlation between Inspiration and Boston is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Inspiration Healthcare Group and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and Inspiration 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 Inspiration Healthcare Group are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Inspiration Healthcare i.e., Inspiration Healthcare and Boston Properties go up and down completely randomly.

Pair Corralation between Inspiration Healthcare and Boston Properties

Assuming the 90 days trading horizon Inspiration Healthcare Group is expected to generate 6.06 times more return on investment than Boston Properties. However, Inspiration Healthcare is 6.06 times more volatile than Boston Properties. It trades about 0.08 of its potential returns per unit of risk. Boston Properties is currently generating about -0.05 per unit of risk. If you would invest  1,250  in Inspiration Healthcare Group on December 25, 2024 and sell it today you would earn a total of  400.00  from holding Inspiration Healthcare Group or generate 32.0% return on investment over 90 days.

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

Inspiration Healthcare Group  vs.  Boston Properties

Inspiration Healthcare

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inspiration Healthcare Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Inspiration Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Boston Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Boston Properties is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Inspiration Healthcare and Boston Properties

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

The idea behind Inspiration Healthcare Group and Boston 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.