Correlation Between Life Healthcare and AfroCentric Investment
Can any of the company-specific risk be diversified away by investing in both Life Healthcare and AfroCentric Investment 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 Life Healthcare and AfroCentric Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare and AfroCentric Investment Corp, you can compare the effects of market volatilities on Life Healthcare and AfroCentric Investment 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 Life Healthcare with a short position of AfroCentric Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and AfroCentric Investment.
Diversification Opportunities for Life Healthcare and AfroCentric Investment
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Life and AfroCentric is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and AfroCentric Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfroCentric Investment and Life 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 Life Healthcare are associated (or correlated) with AfroCentric Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfroCentric Investment has no effect on the direction of Life Healthcare i.e., Life Healthcare and AfroCentric Investment go up and down completely randomly.
Pair Corralation between Life Healthcare and AfroCentric Investment
Assuming the 90 days trading horizon Life Healthcare is expected to generate 0.3 times more return on investment than AfroCentric Investment. However, Life Healthcare is 3.31 times less risky than AfroCentric Investment. It trades about 0.08 of its potential returns per unit of risk. AfroCentric Investment Corp is currently generating about -0.13 per unit of risk. If you would invest 162,600 in Life Healthcare on August 28, 2024 and sell it today you would earn a total of 8,200 from holding Life Healthcare or generate 5.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Healthcare vs. AfroCentric Investment Corp
Performance |
| Timeline |
| Life Healthcare |
| AfroCentric Investment |
Life Healthcare and AfroCentric Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and AfroCentric Investment
The main advantage of trading using opposite Life Healthcare and AfroCentric Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare position performs unexpectedly, AfroCentric Investment 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 AfroCentric Investment will offset losses from the drop in AfroCentric Investment's long position.| Life Healthcare vs. Kap Industrial Holdings | Life Healthcare vs. City Lodge Hotels | Life Healthcare vs. Harmony Gold Mining | Life Healthcare vs. CA Sales Holdings |
| AfroCentric Investment vs. Life Healthcare | AfroCentric Investment vs. Centaur Bci Balanced | AfroCentric Investment vs. Growthpoint Properties | AfroCentric Investment vs. Bowler Metcalf |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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