Correlation Between PKU HealthCare and Healthcare

Can any of the company-specific risk be diversified away by investing in both PKU HealthCare and 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 PKU HealthCare and Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PKU HealthCare Corp and Healthcare Co, you can compare the effects of market volatilities on PKU HealthCare and 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 PKU HealthCare with a short position of Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of PKU HealthCare and Healthcare.

Diversification Opportunities for PKU HealthCare and Healthcare

0.72

Correlation Coefficient

PKU HealthCare  Healthcare

Poor diversification

The 3 months correlation between PKU and Healthcare is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PKU HealthCare Corp and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare and PKU 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 PKU HealthCare Corp are associated (or correlated) with Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of PKU HealthCare i.e., PKU HealthCare and Healthcare go up and down completely randomly.

Pair Corralation between PKU HealthCare and Healthcare

Assuming the 90 days trading horizon PKU HealthCare Corp is expected to under-perform the Healthcare. In addition to that, PKU HealthCare is 1.4 times more volatile than Healthcare Co. It trades about -0.11 of its total potential returns per unit of risk. Healthcare Co is currently generating about -0.09 per unit of volatility. If you would invest  694.00  in Healthcare Co on December 25, 2024 and sell it today you would lose (71.00) from holding Healthcare Co or give up 10.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PKU HealthCare Corp  vs.  Healthcare Co

PKU HealthCare Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PKU HealthCare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PKU HealthCare and Healthcare

The main advantage of trading using opposite PKU HealthCare and Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PKU HealthCare position performs unexpectedly, 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 Healthcare will offset losses from the drop in Healthcare's long position.

The idea behind PKU HealthCare Corp and Healthcare Co 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.