Correlation Between Induction Healthcare and Inspiration Healthcare

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

Diversification Opportunities for Induction Healthcare and Inspiration Healthcare

-0.29

Correlation Coefficient

Induction Healthcare  Inspiration Healthcare

Very good diversification

The 3 months correlation between Induction and Inspiration is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Induction Healthcare Group and Inspiration Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspiration Healthcare 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 Inspiration Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspiration Healthcare has no effect on the direction of Induction Healthcare i.e., Induction Healthcare and Inspiration Healthcare go up and down completely randomly.

Pair Corralation between Induction Healthcare and Inspiration Healthcare

Assuming the 90 days trading horizon Induction Healthcare Group is expected to generate 1.01 times more return on investment than Inspiration Healthcare. However, Induction Healthcare is 1.01 times more volatile than Inspiration Healthcare Group. It trades about -0.04 of its potential returns per unit of risk. Inspiration Healthcare Group is currently generating about -0.06 per unit of risk. If you would invest  2,250  in Induction Healthcare Group on October 22, 2024 and sell it today you would lose (1,400) from holding Induction Healthcare Group or give up 62.22% of portfolio value over 90 days.

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

Induction Healthcare Group  vs.  Inspiration Healthcare Group

Induction Healthcare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Induction Healthcare Group are ranked lower than 6 (%) 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.

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 unsteady 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.

Pair Trading with Induction Healthcare and Inspiration Healthcare

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

The idea behind Induction Healthcare Group and Inspiration Healthcare 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.