Correlation Between CHC Healthcare and MedFirst Healthcare
Can any of the company-specific risk be diversified away by investing in both CHC Healthcare and MedFirst 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 CHC Healthcare and MedFirst Healthcare 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 MedFirst Healthcare Services, you can compare the effects of market volatilities on CHC Healthcare and MedFirst 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 CHC Healthcare with a short position of MedFirst Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHC Healthcare and MedFirst Healthcare.
Diversification Opportunities for CHC Healthcare and MedFirst Healthcare
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CHC and MedFirst is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CHC Healthcare Group and MedFirst Healthcare Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedFirst Healthcare 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 MedFirst Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedFirst Healthcare has no effect on the direction of CHC Healthcare i.e., CHC Healthcare and MedFirst Healthcare go up and down completely randomly.
Pair Corralation between CHC Healthcare and MedFirst Healthcare
Assuming the 90 days trading horizon CHC Healthcare Group is expected to generate 1.22 times more return on investment than MedFirst Healthcare. However, CHC Healthcare is 1.22 times more volatile than MedFirst Healthcare Services. It trades about 0.16 of its potential returns per unit of risk. MedFirst Healthcare Services is currently generating about 0.0 per unit of risk. If you would invest 4,315 in CHC Healthcare Group on November 6, 2024 and sell it today you would earn a total of 115.00 from holding CHC Healthcare Group or generate 2.67% 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. MedFirst Healthcare Services
Performance |
| Timeline |
| CHC Healthcare Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| MedFirst Healthcare |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CHC Healthcare and MedFirst Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHC Healthcare and MedFirst Healthcare
The main advantage of trading using opposite CHC Healthcare and MedFirst Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHC Healthcare position performs unexpectedly, MedFirst 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 MedFirst Healthcare will offset losses from the drop in MedFirst Healthcare's long position.The idea behind CHC Healthcare Group and MedFirst Healthcare Services 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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