Correlation Between Al Aqar and IHH Healthcare

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

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

Diversification Opportunities for Al Aqar and IHH Healthcare

0.6

Correlation Coefficient

Al Aqar  IHH Healthcare

Poor diversification

The 3 months correlation between 5116 and IHH is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Al Aqar Healthcare and IHH Healthcare Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHH Healthcare Bhd and Al Aqar 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 Al Aqar Healthcare are associated (or correlated) with IHH Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHH Healthcare Bhd has no effect on the direction of Al Aqar i.e., Al Aqar and IHH Healthcare go up and down completely randomly.

Pair Corralation between Al Aqar and IHH Healthcare

Assuming the 90 days trading horizon Al Aqar is expected to generate 1.2 times less return on investment than IHH Healthcare. But when comparing it to its historical volatility, Al Aqar Healthcare is 1.17 times less risky than IHH Healthcare. It trades about 0.09 of its potential returns per unit of risk. IHH Healthcare Bhd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  674.00  in IHH Healthcare Bhd on September 13, 2024 and sell it today you would earn a total of  43.00  from holding IHH Healthcare Bhd or generate 6.38% return on investment over 90 days.

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

Al Aqar Healthcare  vs.  IHH Healthcare Bhd

Al Aqar Healthcare

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Al Aqar Healthcare are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Al Aqar is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

IHH Healthcare Bhd

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IHH Healthcare Bhd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, IHH Healthcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Al Aqar and IHH Healthcare

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

The idea behind Al Aqar Healthcare and IHH Healthcare Bhd 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.