Correlation Between Netcare and Dipula Income

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

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

Diversification Opportunities for Netcare and Dipula Income

-0.08

Correlation Coefficient

Netcare  Dipula Income

Good diversification

The 3 months correlation between Netcare and Dipula is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Netcare and Dipula Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dipula Income and Netcare 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 Netcare are associated (or correlated) with Dipula Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dipula Income has no effect on the direction of Netcare i.e., Netcare and Dipula Income go up and down completely randomly.

Pair Corralation between Netcare and Dipula Income

Assuming the 90 days trading horizon Netcare is expected to generate 17.36 times less return on investment than Dipula Income. But when comparing it to its historical volatility, Netcare is 2.04 times less risky than Dipula Income. It trades about 0.01 of its potential returns per unit of risk. Dipula Income is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  48,000  in Dipula Income on October 12, 2024 and sell it today you would earn a total of  3,100  from holding Dipula Income or generate 6.46% return on investment over 90 days.

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

Netcare  vs.  Dipula Income

Netcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dipula Income

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Netcare and Dipula Income

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

The idea behind Netcare and Dipula Income 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.