Correlation Between Global Health and Resource Base
Can any of the company-specific risk be diversified away by investing in both Global Health and Resource Base 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 Resource Base into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Health and Resource Base, you can compare the effects of market volatilities on Global Health and Resource Base 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 Resource Base. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Health and Resource Base.
Diversification Opportunities for Global Health and Resource Base
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Resource is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Global Health and Resource Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Base 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 Resource Base. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Base has no effect on the direction of Global Health i.e., Global Health and Resource Base go up and down completely randomly.
Pair Corralation between Global Health and Resource Base
Assuming the 90 days trading horizon Global Health is expected to generate 0.95 times more return on investment than Resource Base. However, Global Health is 1.06 times less risky than Resource Base. It trades about 0.02 of its potential returns per unit of risk. Resource Base is currently generating about -0.02 per unit of risk. If you would invest 17.00 in Global Health on September 1, 2024 and sell it today you would lose (3.00) from holding Global Health or give up 17.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Health vs. Resource Base
Performance |
| Timeline |
| Global Health |
| Resource Base |
Global Health and Resource Base Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Health and Resource Base
The main advantage of trading using opposite Global Health and Resource Base positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Health position performs unexpectedly, Resource Base 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 Resource Base will offset losses from the drop in Resource Base's long position.| Global Health vs. Alto Metals | Global Health vs. Ras Technology Holdings | Global Health vs. Ainsworth Game Technology | Global Health vs. Aurelia Metals |
| Resource Base vs. Super Retail Group | Resource Base vs. Macquarie Bank Limited | Resource Base vs. Dexus Convenience Retail | Resource Base vs. Kkr Credit Income |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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