Correlation Between Innovative Medical and Inspur Software

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

By analyzing existing cross correlation between Innovative Medical Management and Inspur Software Co, you can compare the effects of market volatilities on Innovative Medical and Inspur Software 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 Innovative Medical with a short position of Inspur Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Medical and Inspur Software.

Diversification Opportunities for Innovative Medical and Inspur Software

0.89

Correlation Coefficient

Innovative Medical  Inspur Software

Very poor diversification

The 3 months correlation between Innovative and Inspur is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Medical Management and Inspur Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspur Software and Innovative Medical 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 Innovative Medical Management are associated (or correlated) with Inspur Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspur Software has no effect on the direction of Innovative Medical i.e., Innovative Medical and Inspur Software go up and down completely randomly.

Pair Corralation between Innovative Medical and Inspur Software

Assuming the 90 days trading horizon Innovative Medical is expected to generate 1.13 times less return on investment than Inspur Software. In addition to that, Innovative Medical is 1.02 times more volatile than Inspur Software Co. It trades about 0.19 of its total potential returns per unit of risk. Inspur Software Co is currently generating about 0.21 per unit of volatility. If you would invest  974.00  in Inspur Software Co on September 4, 2024 and sell it today you would earn a total of  583.00  from holding Inspur Software Co or generate 59.86% return on investment over 90 days.

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

Innovative Medical Management  vs.  Inspur Software Co

Innovative Medical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Medical Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Innovative Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Inspur Software

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inspur Software Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inspur Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innovative Medical and Inspur Software

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

The idea behind Innovative Medical Management and Inspur Software Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.