Correlation Between Shopify and WELL Health
Can any of the company-specific risk be diversified away by investing in both Shopify and WELL Health 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 Shopify and WELL Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shopify and WELL Health Technologies, you can compare the effects of market volatilities on Shopify and WELL Health 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 Shopify with a short position of WELL Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shopify and WELL Health.
Diversification Opportunities for Shopify and WELL Health
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Shopify and WELL is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and WELL Health Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELL Health Technologies and Shopify 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 Shopify are associated (or correlated) with WELL Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELL Health Technologies has no effect on the direction of Shopify i.e., Shopify and WELL Health go up and down completely randomly.
Pair Corralation between Shopify and WELL Health
Assuming the 90 days trading horizon Shopify is expected to generate 1.43 times more return on investment than WELL Health. However, Shopify is 1.43 times more volatile than WELL Health Technologies. It trades about 0.38 of its potential returns per unit of risk. WELL Health Technologies is currently generating about 0.38 per unit of risk. If you would invest 10,892 in Shopify on September 1, 2024 and sell it today you would earn a total of 5,292 from holding Shopify or generate 48.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shopify vs. WELL Health Technologies
Performance |
| Timeline |
| Shopify |
| WELL Health Technologies |
Shopify and WELL Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shopify and WELL Health
The main advantage of trading using opposite Shopify and WELL Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shopify position performs unexpectedly, WELL Health 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 WELL Health will offset losses from the drop in WELL Health's long position.The idea behind Shopify and WELL Health Technologies 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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