Correlation Between Healthcare and Shanghai CEO

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Can any of the company-specific risk be diversified away by investing in both Healthcare and Shanghai CEO 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 Healthcare and Shanghai CEO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Healthcare Co and Shanghai CEO Environmental, you can compare the effects of market volatilities on Healthcare and Shanghai CEO 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 Healthcare with a short position of Shanghai CEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare and Shanghai CEO.

Diversification Opportunities for Healthcare and Shanghai CEO

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Healthcare and Shanghai is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Co and Shanghai CEO Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai CEO Environ and 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 Healthcare Co are associated (or correlated) with Shanghai CEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai CEO Environ has no effect on the direction of Healthcare i.e., Healthcare and Shanghai CEO go up and down completely randomly.

Pair Corralation between Healthcare and Shanghai CEO

Assuming the 90 days trading horizon Healthcare Co is expected to generate 0.91 times more return on investment than Shanghai CEO. However, Healthcare Co is 1.1 times less risky than Shanghai CEO. It trades about -0.28 of its potential returns per unit of risk. Shanghai CEO Environmental is currently generating about -0.28 per unit of risk. If you would invest  773.00  in Healthcare Co on October 17, 2024 and sell it today you would lose (118.00) from holding Healthcare Co or give up 15.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Healthcare Co  vs.  Shanghai CEO Environmental

 Performance 
       Timeline  
Healthcare 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Healthcare may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Shanghai CEO Environ 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shanghai CEO Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shanghai CEO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Healthcare and Shanghai CEO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Healthcare and Shanghai CEO

The main advantage of trading using opposite Healthcare and Shanghai CEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare position performs unexpectedly, Shanghai CEO 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 Shanghai CEO will offset losses from the drop in Shanghai CEO's long position.
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The idea behind Healthcare Co and Shanghai CEO Environmental 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.
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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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