Correlation Between Ironbark Capital and Epsilon Healthcare

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

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

Diversification Opportunities for Ironbark Capital and Epsilon Healthcare

0.0

Correlation Coefficient

Ironbark Capital  Epsilon Healthcare

Pay attention - limited upside

The 3 months correlation between Ironbark and Epsilon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ironbark Capital and Epsilon Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Healthcare and Ironbark Capital 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 Ironbark Capital are associated (or correlated) with Epsilon Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Healthcare has no effect on the direction of Ironbark Capital i.e., Ironbark Capital and Epsilon Healthcare go up and down completely randomly.

Pair Corralation between Ironbark Capital and Epsilon Healthcare

Assuming the 90 days trading horizon Ironbark Capital is expected to generate 5.0 times less return on investment than Epsilon Healthcare. But when comparing it to its historical volatility, Ironbark Capital is 3.49 times less risky than Epsilon Healthcare. It trades about 0.01 of its potential returns per unit of risk. Epsilon Healthcare is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Epsilon Healthcare on September 24, 2024 and sell it today you would lose (0.10) from holding Epsilon Healthcare or give up 4.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ironbark Capital  vs.  Epsilon Healthcare

Ironbark Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ironbark Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Ironbark Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Epsilon Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Epsilon Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Epsilon Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ironbark Capital and Epsilon Healthcare

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

The idea behind Ironbark Capital and Epsilon 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.