Correlation Between Life Healthcare and Safari Investments
Can any of the company-specific risk be diversified away by investing in both Life Healthcare and Safari Investments 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 Safari Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare and Safari Investments RSA, you can compare the effects of market volatilities on Life Healthcare and Safari Investments 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 Safari Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and Safari Investments.
Diversification Opportunities for Life Healthcare and Safari Investments
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Life and Safari is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and Safari Investments RSA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safari Investments RSA 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 Safari Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safari Investments RSA has no effect on the direction of Life Healthcare i.e., Life Healthcare and Safari Investments go up and down completely randomly.
Pair Corralation between Life Healthcare and Safari Investments
Assuming the 90 days trading horizon Life Healthcare is expected to under-perform the Safari Investments. But the stock apears to be less risky and, when comparing its historical volatility, Life Healthcare is 1.7 times less risky than Safari Investments. The stock trades about -0.08 of its potential returns per unit of risk. The Safari Investments RSA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 67,500 in Safari Investments RSA on October 24, 2024 and sell it today you would lose (300.00) from holding Safari Investments RSA or give up 0.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Life Healthcare vs. Safari Investments RSA
Performance |
| Timeline |
| Life Healthcare |
| Safari Investments RSA |
Life Healthcare and Safari Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and Safari Investments
The main advantage of trading using opposite Life Healthcare and Safari Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare position performs unexpectedly, Safari Investments 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 Safari Investments will offset losses from the drop in Safari Investments' long position.| Life Healthcare vs. Standard Bank Group | Life Healthcare vs. Deneb Investments | Life Healthcare vs. HomeChoice Investments | Life Healthcare vs. Zeder Investments |
| Safari Investments vs. CA Sales Holdings | Safari Investments vs. Advtech | Safari Investments vs. Bytes Technology | Safari Investments vs. HomeChoice 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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