Correlation Between Auto Trader and Induction Healthcare
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Induction 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 Auto Trader and Induction Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Induction Healthcare Group, you can compare the effects of market volatilities on Auto Trader and Induction 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 Auto Trader with a short position of Induction Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Induction Healthcare.
Diversification Opportunities for Auto Trader and Induction Healthcare
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Auto and Induction is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Induction Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Induction Healthcare and Auto Trader 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 Auto Trader Group are associated (or correlated) with Induction Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Induction Healthcare has no effect on the direction of Auto Trader i.e., Auto Trader and Induction Healthcare go up and down completely randomly.
Pair Corralation between Auto Trader and Induction Healthcare
Assuming the 90 days trading horizon Auto Trader Group is expected to generate 0.36 times more return on investment than Induction Healthcare. However, Auto Trader Group is 2.75 times less risky than Induction Healthcare. It trades about 0.07 of its potential returns per unit of risk. Induction Healthcare Group is currently generating about -0.04 per unit of risk. If you would invest 54,220 in Auto Trader Group on August 31, 2024 and sell it today you would earn a total of 30,340 from holding Auto Trader Group or generate 55.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Induction Healthcare Group
Performance |
| Timeline |
| Auto Trader Group |
| Induction Healthcare |
Auto Trader and Induction Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Induction Healthcare
The main advantage of trading using opposite Auto Trader and Induction Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Induction 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 Induction Healthcare will offset losses from the drop in Induction Healthcare's long position.| Auto Trader vs. Infrastrutture Wireless Italiane | Auto Trader vs. European Metals Holdings | Auto Trader vs. Gamma Communications PLC | Auto Trader vs. Empire Metals Limited |
| Induction Healthcare vs. Sydbank | Induction Healthcare vs. Auto Trader Group | Induction Healthcare vs. Cincinnati Financial Corp | Induction Healthcare vs. Synchrony Financial |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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