Correlation Between JS Investments and IBL HealthCare

Can any of the company-specific risk be diversified away by investing in both JS Investments and IBL 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 JS Investments and IBL HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JS Investments and IBL HealthCare, you can compare the effects of market volatilities on JS Investments and IBL 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 JS Investments with a short position of IBL HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of JS Investments and IBL HealthCare.

Diversification Opportunities for JS Investments and IBL HealthCare

0.54

Correlation Coefficient

JS Investments  IBL HealthCare

Very weak diversification

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

Pair Corralation between JS Investments and IBL HealthCare

Assuming the 90 days trading horizon JS Investments is expected to generate 1.12 times more return on investment than IBL HealthCare. However, JS Investments is 1.12 times more volatile than IBL HealthCare. It trades about 0.14 of its potential returns per unit of risk. IBL HealthCare is currently generating about 0.15 per unit of risk. If you would invest  1,828  in JS Investments on September 12, 2024 and sell it today you would earn a total of  641.00  from holding JS Investments or generate 35.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

JS Investments  vs.  IBL HealthCare

JS Investments

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

IBL HealthCare

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IBL HealthCare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, IBL HealthCare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JS Investments and IBL HealthCare

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

The idea behind JS Investments and IBL HealthCare 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.