Correlation Between Global Health and Energy Technologies
Can any of the company-specific risk be diversified away by investing in both Global Health and Energy Technologies 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 Global Health and Energy Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Health and Energy Technologies Limited, you can compare the effects of market volatilities on Global Health and Energy Technologies 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 Global Health with a short position of Energy Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Health and Energy Technologies.
Diversification Opportunities for Global Health and Energy Technologies
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Energy is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Global Health and Energy Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Technologies and Global 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 Global Health are associated (or correlated) with Energy Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Technologies has no effect on the direction of Global Health i.e., Global Health and Energy Technologies go up and down completely randomly.
Pair Corralation between Global Health and Energy Technologies
Assuming the 90 days trading horizon Global Health is expected to generate 2.12 times more return on investment than Energy Technologies. However, Global Health is 2.12 times more volatile than Energy Technologies Limited. It trades about 0.03 of its potential returns per unit of risk. Energy Technologies Limited is currently generating about -0.03 per unit of risk. If you would invest 13.00 in Global Health on September 1, 2024 and sell it today you would earn a total of 1.00 from holding Global Health or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Health vs. Energy Technologies Limited
Performance |
| Timeline |
| Global Health |
| Energy Technologies |
Global Health and Energy Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Health and Energy Technologies
The main advantage of trading using opposite Global Health and Energy Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Health position performs unexpectedly, Energy Technologies 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 Energy Technologies will offset losses from the drop in Energy Technologies' long position.| Global Health vs. Alto Metals | Global Health vs. Ras Technology Holdings | Global Health vs. Ainsworth Game Technology | Global Health vs. Aurelia Metals |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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