Correlation Between Innovative Industrial and Definitive Healthcare

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

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

Diversification Opportunities for Innovative Industrial and Definitive Healthcare

0.34

Correlation Coefficient

Innovative Industrial  Definitive Healthcare

Weak diversification

The 3 months correlation between Innovative and Definitive is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Industrial Properti and Definitive Healthcare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definitive Healthcare and Innovative Industrial 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 Innovative Industrial Properties are associated (or correlated) with Definitive Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definitive Healthcare has no effect on the direction of Innovative Industrial i.e., Innovative Industrial and Definitive Healthcare go up and down completely randomly.

Pair Corralation between Innovative Industrial and Definitive Healthcare

Assuming the 90 days trading horizon Innovative Industrial Properties is expected to generate 0.54 times more return on investment than Definitive Healthcare. However, Innovative Industrial Properties is 1.87 times less risky than Definitive Healthcare. It trades about -0.19 of its potential returns per unit of risk. Definitive Healthcare Corp is currently generating about -0.14 per unit of risk. If you would invest  2,634  in Innovative Industrial Properties on September 25, 2024 and sell it today you would lose (118.00) from holding Innovative Industrial Properties or give up 4.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Innovative Industrial Properti  vs.  Definitive Healthcare Corp

Innovative Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovative Industrial Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Innovative Industrial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Innovative Industrial and Definitive Healthcare

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

The idea behind Innovative Industrial Properties and Definitive Healthcare Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.