Correlation Between Identi Healthcare and Homebiogas

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

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

Diversification Opportunities for Identi Healthcare and Homebiogas

0.76

Correlation Coefficient

Identi Healthcare  Homebiogas

Poor diversification

The 3 months correlation between Identi and Homebiogas is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Identi Healthcare and Homebiogas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homebiogas and Identi 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 Identi Healthcare are associated (or correlated) with Homebiogas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homebiogas has no effect on the direction of Identi Healthcare i.e., Identi Healthcare and Homebiogas go up and down completely randomly.

Pair Corralation between Identi Healthcare and Homebiogas

Assuming the 90 days trading horizon Identi Healthcare is expected to under-perform the Homebiogas. In addition to that, Identi Healthcare is 1.06 times more volatile than Homebiogas. It trades about -0.33 of its total potential returns per unit of risk. Homebiogas is currently generating about -0.26 per unit of volatility. If you would invest  38,860  in Homebiogas on February 27, 2024 and sell it today you would lose (12,510) from holding Homebiogas or give up 32.19% of portfolio value over 90 days.

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

Identi Healthcare  vs.  Homebiogas

Identi Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Identi Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Homebiogas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homebiogas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Identi Healthcare and Homebiogas

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

The idea behind Identi Healthcare and Homebiogas 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.