Correlation Between IMPERIAL TOBACCO and SHIP HEALTHCARE

Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and SHIP 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 IMPERIAL TOBACCO and SHIP HEALTHCARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IMPERIAL TOBACCO and SHIP HEALTHCARE HLDGINC, you can compare the effects of market volatilities on IMPERIAL TOBACCO and SHIP 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 IMPERIAL TOBACCO with a short position of SHIP HEALTHCARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and SHIP HEALTHCARE.

Diversification Opportunities for IMPERIAL TOBACCO and SHIP HEALTHCARE

-0.35

Correlation Coefficient

IMPERIAL TOBACCO  SHIP HEALTHCARE

Very good diversification

The 3 months correlation between IMPERIAL and SHIP is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and SHIP HEALTHCARE HLDGINC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIP HEALTHCARE HLDGINC and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with SHIP HEALTHCARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIP HEALTHCARE HLDGINC has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and SHIP HEALTHCARE go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and SHIP HEALTHCARE

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 1.44 times less return on investment than SHIP HEALTHCARE. But when comparing it to its historical volatility, IMPERIAL TOBACCO is 3.36 times less risky than SHIP HEALTHCARE. It trades about 0.16 of its potential returns per unit of risk. SHIP HEALTHCARE HLDGINC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  824.00  in SHIP HEALTHCARE HLDGINC on September 3, 2024 and sell it today you would earn a total of  546.00  from holding SHIP HEALTHCARE HLDGINC or generate 66.26% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  SHIP HEALTHCARE HLDGINC

IMPERIAL TOBACCO

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, IMPERIAL TOBACCO unveiled solid returns over the last few months and may actually be approaching a breakup point.

SHIP HEALTHCARE HLDGINC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SHIP HEALTHCARE HLDGINC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SHIP HEALTHCARE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IMPERIAL TOBACCO and SHIP HEALTHCARE

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

The idea behind IMPERIAL TOBACCO and SHIP HEALTHCARE HLDGINC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.