Correlation Between Polar Capital and Inspired Plc

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

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

Diversification Opportunities for Polar Capital and Inspired Plc

0.11

Correlation Coefficient

Polar Capital  Inspired Plc

Average diversification

The 3 months correlation between Polar and Inspired is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Technology and Inspired Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspired Plc and Polar Capital 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 Polar Capital Technology are associated (or correlated) with Inspired Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspired Plc has no effect on the direction of Polar Capital i.e., Polar Capital and Inspired Plc go up and down completely randomly.

Pair Corralation between Polar Capital and Inspired Plc

Assuming the 90 days trading horizon Polar Capital Technology is expected to generate 0.49 times more return on investment than Inspired Plc. However, Polar Capital Technology is 2.03 times less risky than Inspired Plc. It trades about 0.07 of its potential returns per unit of risk. Inspired Plc is currently generating about -0.02 per unit of risk. If you would invest  19,940  in Polar Capital Technology on December 23, 2024 and sell it today you would earn a total of  10,760  from holding Polar Capital Technology or generate 53.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Polar Capital Technology  vs.  Inspired Plc

Polar Capital Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Capital Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Inspired Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inspired Plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inspired Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polar Capital and Inspired Plc

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

The idea behind Polar Capital Technology and Inspired Plc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.