Correlation Between Capitol Health and Rea
Can any of the company-specific risk be diversified away by investing in both Capitol Health and Rea 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 Rea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capitol Health and Rea Group, you can compare the effects of market volatilities on Capitol Health and Rea 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 Rea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitol Health and Rea.
Diversification Opportunities for Capitol Health and Rea
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capitol and Rea is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Health and Rea Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rea Group 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 Rea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rea Group has no effect on the direction of Capitol Health i.e., Capitol Health and Rea go up and down completely randomly.
Pair Corralation between Capitol Health and Rea
Assuming the 90 days trading horizon Capitol Health is expected to under-perform the Rea. In addition to that, Capitol Health is 2.03 times more volatile than Rea Group. It trades about -0.04 of its total potential returns per unit of risk. Rea Group is currently generating about 0.31 per unit of volatility. If you would invest 23,305 in Rea Group on September 4, 2024 and sell it today you would earn a total of 2,062 from holding Rea Group or generate 8.85% 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. Rea Group
Performance |
| Timeline |
| Capitol Health |
| Rea Group |
Capitol Health and Rea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capitol Health and Rea
The main advantage of trading using opposite Capitol Health and Rea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitol Health position performs unexpectedly, Rea 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 Rea will offset losses from the drop in Rea's long position.| Capitol Health vs. Pinnacle Investment Management | Capitol Health vs. Stelar Metals | Capitol Health vs. Centaurus Metals | Capitol Health vs. Perseus Mining |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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