Correlation Between Identi Healthcare and Libra Insurance

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

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

Diversification Opportunities for Identi Healthcare and Libra Insurance

-0.52

Correlation Coefficient

Identi Healthcare  Libra Insurance

Excellent diversification

The 3 months correlation between Identi and Libra is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Identi Healthcare and Libra Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Libra Insurance and Identi 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 Identi Healthcare are associated (or correlated) with Libra Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Libra Insurance has no effect on the direction of Identi Healthcare i.e., Identi Healthcare and Libra Insurance go up and down completely randomly.

Pair Corralation between Identi Healthcare and Libra Insurance

Assuming the 90 days trading horizon Identi Healthcare is expected to generate 1.87 times more return on investment than Libra Insurance. However, Identi Healthcare is 1.87 times more volatile than Libra Insurance. It trades about 0.22 of its potential returns per unit of risk. Libra Insurance is currently generating about 0.24 per unit of risk. If you would invest  14,920  in Identi Healthcare on October 1, 2024 and sell it today you would earn a total of  2,940  from holding Identi Healthcare or generate 19.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Identi Healthcare  vs.  Libra Insurance

Identi Healthcare

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Identi Healthcare are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Identi Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Libra Insurance

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Libra Insurance are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Libra Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Identi Healthcare and Libra Insurance

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

The idea behind Identi Healthcare and Libra Insurance 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.