Correlation Between Identi Healthcare and Rapac Communication

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

By analyzing existing cross correlation between Identi Healthcare and Rapac Communication Infrastructure, you can compare the effects of market volatilities on Identi Healthcare and Rapac Communication 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 Rapac Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Identi Healthcare and Rapac Communication.

Diversification Opportunities for Identi Healthcare and Rapac Communication

-0.46

Correlation Coefficient

Identi Healthcare  Rapac Communication

Very good diversification

The 3 months correlation between Identi and Rapac is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Identi Healthcare and Rapac Communication Infrastruc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rapac Communication 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 Rapac Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rapac Communication has no effect on the direction of Identi Healthcare i.e., Identi Healthcare and Rapac Communication go up and down completely randomly.

Pair Corralation between Identi Healthcare and Rapac Communication

Assuming the 90 days trading horizon Identi Healthcare is expected to generate 3.04 times more return on investment than Rapac Communication. However, Identi Healthcare is 3.04 times more volatile than Rapac Communication Infrastructure. It trades about 0.21 of its potential returns per unit of risk. Rapac Communication Infrastructure is currently generating about 0.41 per unit of risk. If you would invest  14,740  in Identi Healthcare on September 21, 2024 and sell it today you would earn a total of  2,900  from holding Identi Healthcare or generate 19.67% 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.  Rapac Communication Infrastruc

Identi Healthcare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Identi Healthcare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Identi Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Rapac Communication

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rapac Communication Infrastructure are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rapac Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Identi Healthcare and Rapac Communication

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

The idea behind Identi Healthcare and Rapac Communication Infrastructure 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.