Correlation Between Induction Healthcare and Ecofin Global

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

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

Diversification Opportunities for Induction Healthcare and Ecofin Global

-0.7

Correlation Coefficient

Induction Healthcare  Ecofin Global

Excellent diversification

The 3 months correlation between Induction and Ecofin is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Induction Healthcare Group and Ecofin Global Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofin Global Utilities and Induction 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 Induction Healthcare Group are associated (or correlated) with Ecofin Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofin Global Utilities has no effect on the direction of Induction Healthcare i.e., Induction Healthcare and Ecofin Global go up and down completely randomly.

Pair Corralation between Induction Healthcare and Ecofin Global

Assuming the 90 days trading horizon Induction Healthcare Group is expected to under-perform the Ecofin Global. In addition to that, Induction Healthcare is 2.87 times more volatile than Ecofin Global Utilities. It trades about -0.06 of its total potential returns per unit of risk. Ecofin Global Utilities is currently generating about 0.04 per unit of volatility. If you would invest  17,202  in Ecofin Global Utilities on October 9, 2024 and sell it today you would earn a total of  1,348  from holding Ecofin Global Utilities or generate 7.84% return on investment over 90 days.

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

Induction Healthcare Group  vs.  Ecofin Global Utilities

Induction Healthcare

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Induction Healthcare Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Induction Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ecofin Global Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Induction Healthcare and Ecofin Global

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

The idea behind Induction Healthcare Group and Ecofin Global Utilities 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.