Correlation Between Hartford Healthcare and Alphacentric Lifesci
Can any of the company-specific risk be diversified away by investing in both Hartford Healthcare and Alphacentric Lifesci 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 Hartford Healthcare and Alphacentric Lifesci into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hartford Healthcare Hls and Alphacentric Lifesci Healthcare, you can compare the effects of market volatilities on Hartford Healthcare and Alphacentric Lifesci 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 Hartford Healthcare with a short position of Alphacentric Lifesci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Healthcare and Alphacentric Lifesci.
Diversification Opportunities for Hartford Healthcare and Alphacentric Lifesci
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hartford and Alphacentric is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Healthcare Hls and Alphacentric Lifesci Healthcar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphacentric Lifesci and Hartford Healthcare 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 Hartford Healthcare Hls are associated (or correlated) with Alphacentric Lifesci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphacentric Lifesci has no effect on the direction of Hartford Healthcare i.e., Hartford Healthcare and Alphacentric Lifesci go up and down completely randomly.
Pair Corralation between Hartford Healthcare and Alphacentric Lifesci
Assuming the 90 days horizon Hartford Healthcare is expected to generate 1.34 times less return on investment than Alphacentric Lifesci. But when comparing it to its historical volatility, Hartford Healthcare Hls is 1.63 times less risky than Alphacentric Lifesci. It trades about 0.02 of its potential returns per unit of risk. Alphacentric Lifesci Healthcare is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,269 in Alphacentric Lifesci Healthcare on August 24, 2024 and sell it today you would earn a total of 56.00 from holding Alphacentric Lifesci Healthcare or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hartford Healthcare Hls vs. Alphacentric Lifesci Healthcar
Performance |
| Timeline |
| Hartford Healthcare Hls |
| Alphacentric Lifesci |
Hartford Healthcare and Alphacentric Lifesci Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hartford Healthcare and Alphacentric Lifesci
The main advantage of trading using opposite Hartford Healthcare and Alphacentric Lifesci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hartford Healthcare position performs unexpectedly, Alphacentric Lifesci 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 Alphacentric Lifesci will offset losses from the drop in Alphacentric Lifesci's long position.The idea behind Hartford Healthcare Hls and Alphacentric Lifesci Healthcare 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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