Correlation Between 3I Group and Trellus Health

Can any of the company-specific risk be diversified away by investing in both 3I Group and Trellus Health 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 Trellus Health 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 Trellus Health plc, you can compare the effects of market volatilities on 3I Group and Trellus Health 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 Trellus Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3I Group and Trellus Health.

Diversification Opportunities for 3I Group and Trellus Health

-0.54

Correlation Coefficient

3I Group  Trellus Health

Excellent diversification

The 3 months correlation between III and Trellus is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding 3I Group PLC and Trellus Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trellus Health plc 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 Trellus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trellus Health plc has no effect on the direction of 3I Group i.e., 3I Group and Trellus Health go up and down completely randomly.

Pair Corralation between 3I Group and Trellus Health

Assuming the 90 days trading horizon 3I Group PLC is expected to generate 0.38 times more return on investment than Trellus Health. However, 3I Group PLC is 2.62 times less risky than Trellus Health. It trades about 0.1 of its potential returns per unit of risk. Trellus Health plc is currently generating about -0.2 per unit of risk. If you would invest  327,756  in 3I Group PLC on September 28, 2024 and sell it today you would earn a total of  30,344  from holding 3I Group PLC or generate 9.26% return on investment over 90 days.

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

3I Group PLC  vs.  Trellus Health plc

3I Group PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 3I Group PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, 3I Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Trellus Health plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trellus Health plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with 3I Group and Trellus Health

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

The idea behind 3I Group PLC and Trellus Health plc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.