Correlation Between Life Healthcare and Oceana
Can any of the company-specific risk be diversified away by investing in both Life Healthcare and Oceana 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 Oceana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare and Oceana, you can compare the effects of market volatilities on Life Healthcare and Oceana 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 Oceana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and Oceana.
Diversification Opportunities for Life Healthcare and Oceana
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Life and Oceana is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and Oceana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oceana 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 Oceana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oceana has no effect on the direction of Life Healthcare i.e., Life Healthcare and Oceana go up and down completely randomly.
Pair Corralation between Life Healthcare and Oceana
Assuming the 90 days trading horizon Life Healthcare is expected to generate 1.08 times less return on investment than Oceana. In addition to that, Life Healthcare is 1.56 times more volatile than Oceana. It trades about 0.02 of its total potential returns per unit of risk. Oceana is currently generating about 0.03 per unit of volatility. If you would invest 580,435 in Oceana on August 30, 2024 and sell it today you would earn a total of 99,565 from holding Oceana or generate 17.15% 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. Oceana
Performance |
| Timeline |
| Life Healthcare |
| Oceana |
Life Healthcare and Oceana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and Oceana
The main advantage of trading using opposite Life Healthcare and Oceana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare position performs unexpectedly, Oceana 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 Oceana will offset losses from the drop in Oceana's long position.| Life Healthcare vs. Growthpoint Properties | Life Healthcare vs. AfricaRhodium ETF | Life Healthcare vs. CoreShares Preference Share | Life Healthcare vs. CoreShares TotalWldStock ETF |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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