Correlation Between Andon Health and RoadMain T

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

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

Diversification Opportunities for Andon Health and RoadMain T

0.64

Correlation Coefficient

Andon Health  RoadMain T

Poor diversification

The 3 months correlation between Andon and RoadMain is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Andon Health Co and RoadMain T Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RoadMain T and Andon Health 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 Andon Health Co are associated (or correlated) with RoadMain T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RoadMain T has no effect on the direction of Andon Health i.e., Andon Health and RoadMain T go up and down completely randomly.

Pair Corralation between Andon Health and RoadMain T

Assuming the 90 days trading horizon Andon Health Co is expected to under-perform the RoadMain T. But the stock apears to be less risky and, when comparing its historical volatility, Andon Health Co is 1.16 times less risky than RoadMain T. The stock trades about 0.0 of its potential returns per unit of risk. The RoadMain T Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,970  in RoadMain T Co on December 26, 2024 and sell it today you would earn a total of  66.00  from holding RoadMain T Co or generate 2.22% return on investment over 90 days.

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

Andon Health Co  vs.  RoadMain T Co

Andon Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Andon Health Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Andon Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RoadMain T

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RoadMain T Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, RoadMain T is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Andon Health and RoadMain T

The main advantage of trading using opposite Andon Health and RoadMain T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Andon Health position performs unexpectedly, RoadMain T 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 RoadMain T will offset losses from the drop in RoadMain T's long position.

The idea behind Andon Health Co and RoadMain T 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.