Correlation Between Inspiration Healthcare and Impax Environmental

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

Diversification Opportunities for Inspiration Healthcare and Impax Environmental

-0.18

Correlation Coefficient

Inspiration Healthcare  Impax Environmental

Good diversification

The 3 months correlation between Inspiration and Impax is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Inspiration Healthcare Group and Impax Environmental Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impax Environmental 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 Impax Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impax Environmental has no effect on the direction of Inspiration Healthcare i.e., Inspiration Healthcare and Impax Environmental go up and down completely randomly.

Pair Corralation between Inspiration Healthcare and Impax Environmental

Assuming the 90 days trading horizon Inspiration Healthcare Group is expected to under-perform the Impax Environmental. In addition to that, Inspiration Healthcare is 2.94 times more volatile than Impax Environmental Markets. It trades about -0.32 of its total potential returns per unit of risk. Impax Environmental Markets is currently generating about -0.05 per unit of volatility. If you would invest  38,800  in Impax Environmental Markets on September 2, 2024 and sell it today you would lose (1,150) from holding Impax Environmental Markets or give up 2.96% of portfolio value over 90 days.

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

Inspiration Healthcare Group  vs.  Impax Environmental Markets

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Impax Environmental

Risk-Adjusted Performance

0 of 100

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Inspiration Healthcare and Impax Environmental

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

The idea behind Inspiration Healthcare Group and Impax Environmental Markets 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.