Correlation Between CHC Healthcare and Wellell
Can any of the company-specific risk be diversified away by investing in both CHC Healthcare and Wellell 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 CHC Healthcare and Wellell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHC Healthcare Group and Wellell, you can compare the effects of market volatilities on CHC Healthcare and Wellell 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 CHC Healthcare with a short position of Wellell. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHC Healthcare and Wellell.
Diversification Opportunities for CHC Healthcare and Wellell
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CHC and Wellell is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding CHC Healthcare Group and Wellell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wellell and CHC Healthcare 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 CHC Healthcare Group are associated (or correlated) with Wellell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wellell has no effect on the direction of CHC Healthcare i.e., CHC Healthcare and Wellell go up and down completely randomly.
Pair Corralation between CHC Healthcare and Wellell
Assuming the 90 days trading horizon CHC Healthcare Group is expected to generate 0.96 times more return on investment than Wellell. However, CHC Healthcare Group is 1.04 times less risky than Wellell. It trades about 0.18 of its potential returns per unit of risk. Wellell is currently generating about -0.05 per unit of risk. If you would invest 4,315 in CHC Healthcare Group on November 5, 2024 and sell it today you would earn a total of 130.00 from holding CHC Healthcare Group or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHC Healthcare Group vs. Wellell
Performance |
| Timeline |
| CHC Healthcare Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Wellell |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CHC Healthcare and Wellell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHC Healthcare and Wellell
The main advantage of trading using opposite CHC Healthcare and Wellell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHC Healthcare position performs unexpectedly, Wellell 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 Wellell will offset losses from the drop in Wellell's long position.The idea behind CHC Healthcare Group and Wellell 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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