Correlation Between 3I Group and Polar Capital

Can any of the company-specific risk be diversified away by investing in both 3I Group and Polar Capital 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 3I Group and Polar Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3I Group PLC and Polar Capital Technology, you can compare the effects of market volatilities on 3I Group and Polar Capital 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 3I Group with a short position of Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3I Group and Polar Capital.

Diversification Opportunities for 3I Group and Polar Capital

0.83

Correlation Coefficient

3I Group  Polar Capital

Very poor diversification

The 3 months correlation between III and Polar is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding 3I Group PLC and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology and 3I Group 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 3I Group PLC are associated (or correlated) with Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of 3I Group i.e., 3I Group and Polar Capital go up and down completely randomly.

Pair Corralation between 3I Group and Polar Capital

Assuming the 90 days trading horizon 3I Group PLC is expected to generate 1.08 times more return on investment than Polar Capital. However, 3I Group is 1.08 times more volatile than Polar Capital Technology. It trades about 0.13 of its potential returns per unit of risk. Polar Capital Technology is currently generating about 0.11 per unit of risk. If you would invest  218,931  in 3I Group PLC on September 22, 2024 and sell it today you would earn a total of  135,869  from holding 3I Group PLC or generate 62.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.63%
Values	Daily Returns

3I Group PLC  vs.  Polar Capital Technology

3I Group PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 3I Group PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, 3I Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Polar Capital Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Polar Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 3I Group and Polar Capital

The main advantage of trading using opposite 3I Group and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3I Group position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.

The idea behind 3I Group PLC and Polar Capital Technology 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.