Correlation Between Simplo Technology and Pacific Hospital
Can any of the company-specific risk be diversified away by investing in both Simplo Technology and Pacific Hospital 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 Simplo Technology and Pacific Hospital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Simplo Technology Co and Pacific Hospital Supply, you can compare the effects of market volatilities on Simplo Technology and Pacific Hospital 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 Simplo Technology with a short position of Pacific Hospital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplo Technology and Pacific Hospital.
Diversification Opportunities for Simplo Technology and Pacific Hospital
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Simplo and Pacific is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Simplo Technology Co and Pacific Hospital Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Hospital Supply and Simplo Technology 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 Simplo Technology Co are associated (or correlated) with Pacific Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Hospital Supply has no effect on the direction of Simplo Technology i.e., Simplo Technology and Pacific Hospital go up and down completely randomly.
Pair Corralation between Simplo Technology and Pacific Hospital
Assuming the 90 days trading horizon Simplo Technology Co is expected to generate 2.76 times more return on investment than Pacific Hospital. However, Simplo Technology is 2.76 times more volatile than Pacific Hospital Supply. It trades about 0.09 of its potential returns per unit of risk. Pacific Hospital Supply is currently generating about 0.15 per unit of risk. If you would invest 32,850 in Simplo Technology Co on November 3, 2024 and sell it today you would earn a total of 7,100 from holding Simplo Technology Co or generate 21.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simplo Technology Co vs. Pacific Hospital Supply
Performance |
| Timeline |
| Simplo Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Pacific Hospital Supply |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Simplo Technology and Pacific Hospital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simplo Technology and Pacific Hospital
The main advantage of trading using opposite Simplo Technology and Pacific Hospital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplo Technology position performs unexpectedly, Pacific Hospital 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 Pacific Hospital will offset losses from the drop in Pacific Hospital's long position.The idea behind Simplo Technology Co and Pacific Hospital Supply 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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