Correlation Between Life Healthcare and Nampak
Can any of the company-specific risk be diversified away by investing in both Life Healthcare and Nampak 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 Nampak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare and Nampak, you can compare the effects of market volatilities on Life Healthcare and Nampak 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 Nampak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and Nampak.
Diversification Opportunities for Life Healthcare and Nampak
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Life and Nampak is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and Nampak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nampak 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 Nampak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nampak has no effect on the direction of Life Healthcare i.e., Life Healthcare and Nampak go up and down completely randomly.
Pair Corralation between Life Healthcare and Nampak
Assuming the 90 days trading horizon Life Healthcare is expected to generate 0.42 times more return on investment than Nampak. However, Life Healthcare is 2.41 times less risky than Nampak. It trades about 0.12 of its potential returns per unit of risk. Nampak is currently generating about -0.09 per unit of risk. If you would invest 170,000 in Life Healthcare on September 12, 2024 and sell it today you would earn a total of 6,500 from holding Life Healthcare or generate 3.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Healthcare vs. Nampak
Performance |
| Timeline |
| Life Healthcare |
| Nampak |
Life Healthcare and Nampak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and Nampak
The main advantage of trading using opposite Life Healthcare and Nampak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare position performs unexpectedly, Nampak 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 Nampak will offset losses from the drop in Nampak's long position.| Life Healthcare vs. AfroCentric Investment Corp | Life Healthcare vs. Sasol Ltd Bee | Life Healthcare vs. Centaur Bci Balanced | Life Healthcare vs. Growthpoint Properties |
| Nampak vs. Astoria Investments | Nampak vs. Kap Industrial Holdings | Nampak vs. eMedia Holdings Limited | Nampak vs. E Media Holdings |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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