Correlation Between IBL HealthCare and Masood Textile

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

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

Diversification Opportunities for IBL HealthCare and Masood Textile

-0.43

Correlation Coefficient

IBL HealthCare  Masood Textile

Very good diversification

The 3 months correlation between IBL and Masood is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding IBL HealthCare and Masood Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masood Textile Mills and IBL 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 IBL HealthCare are associated (or correlated) with Masood Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masood Textile Mills has no effect on the direction of IBL HealthCare i.e., IBL HealthCare and Masood Textile go up and down completely randomly.

Pair Corralation between IBL HealthCare and Masood Textile

Assuming the 90 days trading horizon IBL HealthCare is expected to generate 0.82 times more return on investment than Masood Textile. However, IBL HealthCare is 1.21 times less risky than Masood Textile. It trades about 0.11 of its potential returns per unit of risk. Masood Textile Mills is currently generating about -0.11 per unit of risk. If you would invest  3,149  in IBL HealthCare on August 30, 2024 and sell it today you would earn a total of  728.00  from holding IBL HealthCare or generate 23.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	73.44%
Values	Daily Returns

IBL HealthCare  vs.  Masood Textile Mills

IBL HealthCare

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IBL HealthCare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, IBL HealthCare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Masood Textile Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masood Textile Mills 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IBL HealthCare and Masood Textile

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

The idea behind IBL HealthCare and Masood Textile Mills 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.