Correlation Between Incannex Healthcare and Cardio Diagnostics

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

By analyzing existing cross correlation between Incannex Healthcare Ltd and Cardio Diagnostics Holdings, you can compare the effects of market volatilities on Incannex Healthcare and Cardio Diagnostics 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 Incannex Healthcare with a short position of Cardio Diagnostics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Incannex Healthcare and Cardio Diagnostics.

Diversification Opportunities for Incannex Healthcare and Cardio Diagnostics

-0.28

Correlation Coefficient

Incannex Healthcare  Cardio Diagnostics

Very good diversification

The 3 months correlation between Incannex and Cardio is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Incannex Healthcare Ltd and Cardio Diagnostics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardio Diagnostics and Incannex 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 Incannex Healthcare Ltd are associated (or correlated) with Cardio Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardio Diagnostics has no effect on the direction of Incannex Healthcare i.e., Incannex Healthcare and Cardio Diagnostics go up and down completely randomly.

Pair Corralation between Incannex Healthcare and Cardio Diagnostics

Given the investment horizon of 90 days Incannex Healthcare Ltd is expected to generate 2.19 times more return on investment than Cardio Diagnostics. However, Incannex Healthcare is 2.19 times more volatile than Cardio Diagnostics Holdings. It trades about 0.03 of its potential returns per unit of risk. Cardio Diagnostics Holdings is currently generating about 0.05 per unit of risk. If you would invest  340.00  in Incannex Healthcare Ltd on October 11, 2024 and sell it today you would lose (157.00) from holding Incannex Healthcare Ltd or give up 46.18% of portfolio value over 90 days.

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

Incannex Healthcare Ltd  vs.  Cardio Diagnostics Holdings

Incannex Healthcare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Incannex Healthcare Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical indicators, Incannex Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cardio Diagnostics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardio Diagnostics Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Cardio Diagnostics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Incannex Healthcare and Cardio Diagnostics

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

The idea behind Incannex Healthcare Ltd and Cardio Diagnostics Holdings 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.