Correlation Between Danel and Ilex Medical

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

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

Diversification Opportunities for Danel and Ilex Medical

0.69

Correlation Coefficient

Danel  Ilex Medical

Poor diversification

The 3 months correlation between Danel and Ilex is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Danel and Ilex Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ilex Medical and Danel 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 Danel are associated (or correlated) with Ilex Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ilex Medical has no effect on the direction of Danel i.e., Danel and Ilex Medical go up and down completely randomly.

Pair Corralation between Danel and Ilex Medical

Assuming the 90 days trading horizon Danel is expected to generate 0.68 times more return on investment than Ilex Medical. However, Danel is 1.47 times less risky than Ilex Medical. It trades about 0.44 of its potential returns per unit of risk. Ilex Medical is currently generating about 0.26 per unit of risk. If you would invest  3,156,633  in Danel on September 17, 2024 and sell it today you would earn a total of  1,103,367  from holding Danel or generate 34.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.87%
Values	Daily Returns

Danel  vs.  Ilex Medical

Danel

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Danel are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Danel sustained solid returns over the last few months and may actually be approaching a breakup point.

Ilex Medical

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ilex Medical are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ilex Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danel and Ilex Medical

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

The idea behind Danel and Ilex Medical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.