Correlation Between Packages and IBL HealthCare

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

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

Diversification Opportunities for Packages and IBL HealthCare

0.88

Correlation Coefficient

Packages  IBL HealthCare

Very poor diversification

The 3 months correlation between Packages and IBL is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Packages and IBL HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBL HealthCare and Packages 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 Packages are associated (or correlated) with IBL HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBL HealthCare has no effect on the direction of Packages i.e., Packages and IBL HealthCare go up and down completely randomly.

Pair Corralation between Packages and IBL HealthCare

Assuming the 90 days trading horizon Packages is expected to generate 2.47 times less return on investment than IBL HealthCare. But when comparing it to its historical volatility, Packages is 1.42 times less risky than IBL HealthCare. It trades about 0.09 of its potential returns per unit of risk. IBL HealthCare is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,009  in IBL HealthCare on October 24, 2024 and sell it today you would earn a total of  1,231  from holding IBL HealthCare or generate 40.91% return on investment over 90 days.

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

Packages  vs.  IBL HealthCare

Packages

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Packages are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Packages sustained solid returns over the last few months and may actually be approaching a breakup point.

IBL HealthCare

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IBL HealthCare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, IBL HealthCare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Packages and IBL HealthCare

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

The idea behind Packages and IBL HealthCare 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.