Correlation Between GSR II and Healthcare
Can any of the company-specific risk be diversified away by investing in both GSR II and Healthcare 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 GSR II and Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GSR II Meteora and Healthcare AI Acquisition, you can compare the effects of market volatilities on GSR II and Healthcare 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 GSR II with a short position of Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSR II and Healthcare.
Diversification Opportunities for GSR II and Healthcare
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GSR and Healthcare is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding GSR II Meteora and Healthcare AI Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare AI Acquisition and GSR II 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 GSR II Meteora are associated (or correlated) with Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare AI Acquisition has no effect on the direction of GSR II i.e., GSR II and Healthcare go up and down completely randomly.
Pair Corralation between GSR II and Healthcare
Assuming the 90 days horizon GSR II is expected to generate 7.43 times less return on investment than Healthcare. But when comparing it to its historical volatility, GSR II Meteora is 8.59 times less risky than Healthcare. It trades about 0.2 of its potential returns per unit of risk. Healthcare AI Acquisition is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 6.10 in Healthcare AI Acquisition on September 2, 2024 and sell it today you would lose (3.87) from holding Healthcare AI Acquisition or give up 63.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 9.43% |
| Values | Daily Returns |
GSR II Meteora vs. Healthcare AI Acquisition
Performance |
| Timeline |
| GSR II Meteora |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Healthcare AI Acquisition |
GSR II and Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GSR II and Healthcare
The main advantage of trading using opposite GSR II and Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSR II position performs unexpectedly, Healthcare 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 Healthcare will offset losses from the drop in Healthcare's long position.The idea behind GSR II Meteora and Healthcare AI Acquisition 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.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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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