Correlation Between Inspiration Healthcare and Scandic Hotels

Can any of the company-specific risk be diversified away by investing in both Inspiration Healthcare and Scandic Hotels 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 Scandic Hotels 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 Scandic Hotels Group, you can compare the effects of market volatilities on Inspiration Healthcare and Scandic Hotels 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 Scandic Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspiration Healthcare and Scandic Hotels.

Diversification Opportunities for Inspiration Healthcare and Scandic Hotels

0.27

Correlation Coefficient

Inspiration Healthcare  Scandic Hotels

Modest diversification

The 3 months correlation between Inspiration and Scandic is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Inspiration Healthcare Group and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of Inspiration Healthcare i.e., Inspiration Healthcare and Scandic Hotels go up and down completely randomly.

Pair Corralation between Inspiration Healthcare and Scandic Hotels

Assuming the 90 days trading horizon Inspiration Healthcare Group is expected to under-perform the Scandic Hotels. In addition to that, Inspiration Healthcare is 2.11 times more volatile than Scandic Hotels Group. It trades about -0.05 of its total potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.07 per unit of volatility. If you would invest  3,826  in Scandic Hotels Group on October 17, 2024 and sell it today you would earn a total of  3,077  from holding Scandic Hotels Group or generate 80.42% return on investment over 90 days.

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

Inspiration Healthcare Group  vs.  Scandic Hotels Group

Inspiration Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspiration Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Scandic Hotels Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scandic Hotels Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Inspiration Healthcare and Scandic Hotels

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

The idea behind Inspiration Healthcare Group and Scandic Hotels Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.