Correlation Between China Health and First Colombia
Can any of the company-specific risk be diversified away by investing in both China Health and First Colombia 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 China Health and First Colombia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Health Management and First Colombia Gold, you can compare the effects of market volatilities on China Health and First Colombia 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 China Health with a short position of First Colombia. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Health and First Colombia.
Diversification Opportunities for China Health and First Colombia
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and First is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and First Colombia Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Colombia Gold and China 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 China Health Management are associated (or correlated) with First Colombia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Colombia Gold has no effect on the direction of China Health i.e., China Health and First Colombia go up and down completely randomly.
Pair Corralation between China Health and First Colombia
Given the investment horizon of 90 days China Health is expected to generate 38.62 times less return on investment than First Colombia. But when comparing it to its historical volatility, China Health Management is 11.28 times less risky than First Colombia. It trades about 0.05 of its potential returns per unit of risk. First Colombia Gold is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 0.02 in First Colombia Gold on September 3, 2024 and sell it today you would lose (0.01) from holding First Colombia Gold or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.59% |
| Values | Daily Returns |
China Health Management vs. First Colombia Gold
Performance |
| Timeline |
| China Health Management |
| First Colombia Gold |
China Health and First Colombia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Health and First Colombia
The main advantage of trading using opposite China Health and First Colombia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Health position performs unexpectedly, First Colombia 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 First Colombia will offset losses from the drop in First Colombia's long position.| China Health vs. Absolute Health and | China Health vs. Embrace Change Acquisition | China Health vs. Supurva Healthcare Group | China Health vs. TransAKT |
| First Colombia vs. Manaris Corp | First Colombia vs. Green Planet Bio | First Colombia vs. Continental Beverage Brands | First Colombia vs. Opus Magnum Ameris |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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