Correlation Between GH Research and Wesana Health

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

Diversification Opportunities for GH Research and Wesana Health

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between GHRS and Wesana is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding GH Research PLC and Wesana Health Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesana Health Holdings and GH Research 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 GH Research PLC are associated (or correlated) with Wesana Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesana Health Holdings has no effect on the direction of GH Research i.e., GH Research and Wesana Health go up and down completely randomly.

Pair Corralation between GH Research and Wesana Health

Given the investment horizon of 90 days GH Research is expected to generate 1.94 times less return on investment than Wesana Health. But when comparing it to its historical volatility, GH Research PLC is 2.36 times less risky than Wesana Health. It trades about 0.16 of its potential returns per unit of risk. Wesana Health Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6.75  in Wesana Health Holdings on November 27, 2024 and sell it today you would lose (0.75) from holding Wesana Health Holdings or give up 11.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

GH Research PLC  vs.  Wesana Health Holdings

 Performance 
       Timeline  
GH Research PLC 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in GH Research PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, GH Research unveiled solid returns over the last few months and may actually be approaching a breakup point.
Wesana Health Holdings 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Wesana Health Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Wesana Health reported solid returns over the last few months and may actually be approaching a breakup point.

GH Research and Wesana Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GH Research and Wesana Health

The main advantage of trading using opposite GH Research and Wesana Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GH Research position performs unexpectedly, Wesana Health 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 Wesana Health will offset losses from the drop in Wesana Health's long position.
The idea behind GH Research PLC and Wesana Health Holdings 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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