Correlation Between Itay Financial and Seach Medical

Can any of the company-specific risk be diversified away by investing in both Itay Financial and Seach Medical 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 Itay Financial and Seach Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Itay Financial AA and Seach Medical Group, you can compare the effects of market volatilities on Itay Financial and Seach Medical 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 Itay Financial with a short position of Seach Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itay Financial and Seach Medical.

Diversification Opportunities for Itay Financial and Seach Medical

0.85

Correlation Coefficient

Itay Financial  Seach Medical

Very poor diversification

The 3 months correlation between Itay and Seach is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Itay Financial AA and Seach Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seach Medical Group and Itay Financial 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 Itay Financial AA are associated (or correlated) with Seach Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seach Medical Group has no effect on the direction of Itay Financial i.e., Itay Financial and Seach Medical go up and down completely randomly.

Pair Corralation between Itay Financial and Seach Medical

Assuming the 90 days trading horizon Itay Financial is expected to generate 1.18 times less return on investment than Seach Medical. In addition to that, Itay Financial is 1.44 times more volatile than Seach Medical Group. It trades about 0.24 of its total potential returns per unit of risk. Seach Medical Group is currently generating about 0.41 per unit of volatility. If you would invest  19,590  in Seach Medical Group on September 25, 2024 and sell it today you would earn a total of  11,490  from holding Seach Medical Group or generate 58.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Itay Financial AA  vs.  Seach Medical Group

Itay Financial AA

Risk-Adjusted Performance

19 of 100

Solid

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

Seach Medical Group

Risk-Adjusted Performance

32 of 100

Very Strong

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

Pair Trading with Itay Financial and Seach Medical

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

The idea behind Itay Financial AA and Seach Medical Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.