Correlation Between Ilex Medical and Spuntech
Can any of the company-specific risk be diversified away by investing in both Ilex Medical and Spuntech 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 Ilex Medical and Spuntech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ilex Medical and Spuntech, you can compare the effects of market volatilities on Ilex Medical and Spuntech 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 Ilex Medical with a short position of Spuntech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ilex Medical and Spuntech.
Diversification Opportunities for Ilex Medical and Spuntech
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ilex and Spuntech is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ilex Medical and Spuntech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spuntech and Ilex Medical 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 Ilex Medical are associated (or correlated) with Spuntech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spuntech has no effect on the direction of Ilex Medical i.e., Ilex Medical and Spuntech go up and down completely randomly.
Pair Corralation between Ilex Medical and Spuntech
Assuming the 90 days trading horizon Ilex Medical is expected to generate 1.02 times less return on investment than Spuntech. But when comparing it to its historical volatility, Ilex Medical is 1.27 times less risky than Spuntech. It trades about 0.37 of its potential returns per unit of risk. Spuntech is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 43,720 in Spuntech on August 29, 2024 and sell it today you would earn a total of 5,760 from holding Spuntech or generate 13.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ilex Medical vs. Spuntech
Performance |
| Timeline |
| Ilex Medical |
| Spuntech |
Ilex Medical and Spuntech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ilex Medical and Spuntech
The main advantage of trading using opposite Ilex Medical and Spuntech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ilex Medical position performs unexpectedly, Spuntech 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 Spuntech will offset losses from the drop in Spuntech's long position.The idea behind Ilex Medical and Spuntech 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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