Correlation Between Life Healthcare and Trencor
Can any of the company-specific risk be diversified away by investing in both Life Healthcare and Trencor 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 Trencor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare and Trencor, you can compare the effects of market volatilities on Life Healthcare and Trencor 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 Trencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and Trencor.
Diversification Opportunities for Life Healthcare and Trencor
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Life and Trencor is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and Trencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trencor 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 Trencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trencor has no effect on the direction of Life Healthcare i.e., Life Healthcare and Trencor go up and down completely randomly.
Pair Corralation between Life Healthcare and Trencor
Assuming the 90 days trading horizon Life Healthcare is expected to generate 2.06 times less return on investment than Trencor. In addition to that, Life Healthcare is 1.18 times more volatile than Trencor. It trades about 0.02 of its total potential returns per unit of risk. Trencor is currently generating about 0.04 per unit of volatility. If you would invest 57,800 in Trencor on September 4, 2024 and sell it today you would earn a total of 18,200 from holding Trencor or generate 31.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Life Healthcare vs. Trencor
Performance |
| Timeline |
| Life Healthcare |
| Trencor |
Life Healthcare and Trencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and Trencor
The main advantage of trading using opposite Life Healthcare and Trencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare position performs unexpectedly, Trencor 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 Trencor will offset losses from the drop in Trencor's long position.| Life Healthcare vs. Netcare | Life Healthcare vs. Sasol Ltd Bee | Life Healthcare vs. Centaur Bci Balanced | Life Healthcare vs. Growthpoint Properties |
| Trencor vs. Brimstone Investment | Trencor vs. Capitec Bank Holdings | Trencor vs. Frontier Transport Holdings | Trencor vs. Kumba Iron Ore |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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