Correlation Between WM Technology and CareMax
Can any of the company-specific risk be diversified away by investing in both WM Technology and CareMax 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 WM Technology and CareMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WM Technology and CareMax, you can compare the effects of market volatilities on WM Technology and CareMax 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 WM Technology with a short position of CareMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of WM Technology and CareMax.
Diversification Opportunities for WM Technology and CareMax
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MAPSW and CareMax is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding WM Technology and CareMax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareMax and WM Technology 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 WM Technology are associated (or correlated) with CareMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareMax has no effect on the direction of WM Technology i.e., WM Technology and CareMax go up and down completely randomly.
Pair Corralation between WM Technology and CareMax
Assuming the 90 days horizon WM Technology is expected to generate 14.94 times less return on investment than CareMax. But when comparing it to its historical volatility, WM Technology is 7.41 times less risky than CareMax. It trades about 0.07 of its potential returns per unit of risk. CareMax is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 27.00 in CareMax on September 3, 2024 and sell it today you would lose (26.04) from holding CareMax or give up 96.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 73.77% |
| Values | Daily Returns |
WM Technology vs. CareMax
Performance |
| Timeline |
| WM Technology |
| CareMax |
WM Technology and CareMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WM Technology and CareMax
The main advantage of trading using opposite WM Technology and CareMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WM Technology position performs unexpectedly, CareMax 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 CareMax will offset losses from the drop in CareMax's long position.The idea behind WM Technology and CareMax pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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