Correlation Between Procaps Group and Incannex Healthcare

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

By analyzing existing cross correlation between Procaps Group SA and Incannex Healthcare Ltd, you can compare the effects of market volatilities on Procaps Group and Incannex 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 Procaps Group with a short position of Incannex Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procaps Group and Incannex Healthcare.

Diversification Opportunities for Procaps Group and Incannex Healthcare

-0.39

Correlation Coefficient

Procaps Group  Incannex Healthcare

Very good diversification

The 3 months correlation between Procaps and Incannex is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Procaps Group SA and Incannex Healthcare Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incannex Healthcare and Procaps 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 Procaps Group SA are associated (or correlated) with Incannex Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incannex Healthcare has no effect on the direction of Procaps Group i.e., Procaps Group and Incannex Healthcare go up and down completely randomly.

Pair Corralation between Procaps Group and Incannex Healthcare

Given the investment horizon of 90 days Procaps Group SA is expected to generate 2.97 times more return on investment than Incannex Healthcare. However, Procaps Group is 2.97 times more volatile than Incannex Healthcare Ltd. It trades about 0.05 of its potential returns per unit of risk. Incannex Healthcare Ltd is currently generating about 0.04 per unit of risk. If you would invest  190.00  in Procaps Group SA on September 3, 2024 and sell it today you would lose (39.00) from holding Procaps Group SA or give up 20.53% of portfolio value over 90 days.

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

Procaps Group SA  vs.  Incannex Healthcare Ltd

Procaps Group SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Procaps Group SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Procaps Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Incannex Healthcare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Incannex Healthcare Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical indicators, Incannex Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procaps Group and Incannex Healthcare

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

The idea behind Procaps Group SA and Incannex Healthcare Ltd 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.