Correlation Between Capitol Health and Asara Resources
Can any of the company-specific risk be diversified away by investing in both Capitol Health and Asara Resources 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 Capitol Health and Asara Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capitol Health and Asara Resources, you can compare the effects of market volatilities on Capitol Health and Asara Resources 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 Capitol Health with a short position of Asara Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitol Health and Asara Resources.
Diversification Opportunities for Capitol Health and Asara Resources
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capitol and Asara is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Health and Asara Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asara Resources and Capitol Health 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 Capitol Health are associated (or correlated) with Asara Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asara Resources has no effect on the direction of Capitol Health i.e., Capitol Health and Asara Resources go up and down completely randomly.
Pair Corralation between Capitol Health and Asara Resources
Assuming the 90 days trading horizon Capitol Health is expected to under-perform the Asara Resources. But the stock apears to be less risky and, when comparing its historical volatility, Capitol Health is 2.42 times less risky than Asara Resources. The stock trades about -0.03 of its potential returns per unit of risk. The Asara Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Asara Resources on September 12, 2024 and sell it today you would earn a total of 0.20 from holding Asara Resources or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capitol Health vs. Asara Resources
Performance |
| Timeline |
| Capitol Health |
| Asara Resources |
Capitol Health and Asara Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capitol Health and Asara Resources
The main advantage of trading using opposite Capitol Health and Asara Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitol Health position performs unexpectedly, Asara Resources 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 Asara Resources will offset losses from the drop in Asara Resources' long position.| Capitol Health vs. CSL | Capitol Health vs. Tamawood | Capitol Health vs. Cochlear | Capitol Health vs. Rea Group |
| Asara Resources vs. Andean Silver Limited | Asara Resources vs. Aurelia Metals | Asara Resources vs. Neurotech International | Asara Resources vs. Zoom2u Technologies |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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