Correlation Between Worldwide Healthcare and Spire Healthcare
Can any of the company-specific risk be diversified away by investing in both Worldwide Healthcare and Spire Healthcare 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 Worldwide Healthcare and Spire Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Worldwide Healthcare Trust and Spire Healthcare Group, you can compare the effects of market volatilities on Worldwide Healthcare and Spire Healthcare 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 Worldwide Healthcare with a short position of Spire Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Worldwide Healthcare and Spire Healthcare.
Diversification Opportunities for Worldwide Healthcare and Spire Healthcare
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Worldwide and Spire is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Worldwide Healthcare Trust and Spire Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Healthcare and Worldwide 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 Worldwide Healthcare Trust are associated (or correlated) with Spire Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Healthcare has no effect on the direction of Worldwide Healthcare i.e., Worldwide Healthcare and Spire Healthcare go up and down completely randomly.
Pair Corralation between Worldwide Healthcare and Spire Healthcare
Assuming the 90 days trading horizon Worldwide Healthcare Trust is expected to under-perform the Spire Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Worldwide Healthcare Trust is 1.11 times less risky than Spire Healthcare. The stock trades about -0.18 of its potential returns per unit of risk. The Spire Healthcare Group is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 22,250 in Spire Healthcare Group on August 28, 2024 and sell it today you would lose (400.00) from holding Spire Healthcare Group or give up 1.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Worldwide Healthcare Trust vs. Spire Healthcare Group
Performance |
| Timeline |
| Worldwide Healthcare |
| Spire Healthcare |
Worldwide Healthcare and Spire Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Worldwide Healthcare and Spire Healthcare
The main advantage of trading using opposite Worldwide Healthcare and Spire Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worldwide Healthcare position performs unexpectedly, Spire Healthcare 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 Spire Healthcare will offset losses from the drop in Spire Healthcare's long position.| Worldwide Healthcare vs. Catalyst Media Group | Worldwide Healthcare vs. Oncimmune Holdings plc | Worldwide Healthcare vs. Invesco Health Care | Worldwide Healthcare vs. Coor Service Management |
| Spire Healthcare vs. Future Metals NL | Spire Healthcare vs. Vienna Insurance Group | Spire Healthcare vs. Ecclesiastical Insurance Office | Spire Healthcare vs. Gear4music Plc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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