Correlation Between Life Healthcare and Advtech
Can any of the company-specific risk be diversified away by investing in both Life Healthcare and Advtech 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 Advtech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare and Advtech, you can compare the effects of market volatilities on Life Healthcare and Advtech 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 Advtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and Advtech.
Diversification Opportunities for Life Healthcare and Advtech
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Life and Advtech is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and Advtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advtech 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 Advtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advtech has no effect on the direction of Life Healthcare i.e., Life Healthcare and Advtech go up and down completely randomly.
Pair Corralation between Life Healthcare and Advtech
Assuming the 90 days trading horizon Life Healthcare is expected to under-perform the Advtech. But the stock apears to be less risky and, when comparing its historical volatility, Life Healthcare is 1.03 times less risky than Advtech. The stock trades about -0.15 of its potential returns per unit of risk. The Advtech is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 327,500 in Advtech on November 30, 2024 and sell it today you would lose (10,100) from holding Advtech or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Healthcare vs. Advtech
Performance |
| Timeline |
| Life Healthcare |
| Advtech |
Life Healthcare and Advtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and Advtech
The main advantage of trading using opposite Life Healthcare and Advtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare position performs unexpectedly, Advtech 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 Advtech will offset losses from the drop in Advtech's long position.| Life Healthcare vs. Brimstone Investment | Life Healthcare vs. Bytes Technology | Life Healthcare vs. Copper 360 | Life Healthcare vs. eMedia Holdings Limited |
| Advtech vs. RCL Foods | Advtech vs. ABSA Bank Limited | Advtech vs. Allied Electronics | Advtech vs. Astoria Investments |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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