Correlation Between Malvern International and Induction Healthcare

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

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

Diversification Opportunities for Malvern International and Induction Healthcare

0.38

Correlation Coefficient

Malvern International  Induction Healthcare

Weak diversification

The 3 months correlation between Malvern and Induction is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Malvern International and Induction Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Induction Healthcare and Malvern International 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 Malvern International are associated (or correlated) with Induction Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Induction Healthcare has no effect on the direction of Malvern International i.e., Malvern International and Induction Healthcare go up and down completely randomly.

Pair Corralation between Malvern International and Induction Healthcare

Assuming the 90 days trading horizon Malvern International is expected to generate 0.66 times more return on investment than Induction Healthcare. However, Malvern International is 1.51 times less risky than Induction Healthcare. It trades about 0.03 of its potential returns per unit of risk. Induction Healthcare Group is currently generating about -0.03 per unit of risk. If you would invest  1,525  in Malvern International on October 22, 2024 and sell it today you would earn a total of  425.00  from holding Malvern International or generate 27.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Malvern International  vs.  Induction Healthcare Group

Malvern International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Malvern International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Malvern International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Malvern International and Induction Healthcare

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

The idea behind Malvern International and Induction 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.