Correlation Between Wellell and CHC Healthcare
Can any of the company-specific risk be diversified away by investing in both Wellell and CHC 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 Wellell and CHC Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wellell and CHC Healthcare Group, you can compare the effects of market volatilities on Wellell and CHC 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 Wellell with a short position of CHC Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wellell and CHC Healthcare.
Diversification Opportunities for Wellell and CHC Healthcare
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wellell and CHC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Wellell and CHC Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Healthcare Group and Wellell 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 Wellell are associated (or correlated) with CHC Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Healthcare Group has no effect on the direction of Wellell i.e., Wellell and CHC Healthcare go up and down completely randomly.
Pair Corralation between Wellell and CHC Healthcare
Assuming the 90 days trading horizon Wellell is expected to under-perform the CHC Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Wellell is 2.83 times less risky than CHC Healthcare. The stock trades about -0.25 of its potential returns per unit of risk. The CHC Healthcare Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 4,265 in CHC Healthcare Group on August 29, 2024 and sell it today you would lose (125.00) from holding CHC Healthcare Group or give up 2.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wellell vs. CHC Healthcare Group
Performance |
| Timeline |
| Wellell |
| CHC Healthcare Group |
Wellell and CHC Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wellell and CHC Healthcare
The main advantage of trading using opposite Wellell and CHC Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wellell position performs unexpectedly, CHC 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 CHC Healthcare will offset losses from the drop in CHC Healthcare's long position.The idea behind Wellell and CHC Healthcare 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.| CHC Healthcare vs. Phytohealth Corp | CHC Healthcare vs. GenMont Biotech | CHC Healthcare vs. Hung Sheng Construction | CHC Healthcare vs. De Licacy Industrial |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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