Correlation Between AP Moeller and Worldwide Healthcare

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

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

Diversification Opportunities for AP Moeller and Worldwide Healthcare

-0.6

Correlation Coefficient

AP Moeller  Worldwide Healthcare

Excellent diversification

The 3 months correlation between 0O77 and Worldwide is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller and Worldwide Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worldwide Healthcare and AP Moeller 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 AP Moeller are associated (or correlated) with Worldwide Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worldwide Healthcare has no effect on the direction of AP Moeller i.e., AP Moeller and Worldwide Healthcare go up and down completely randomly.

Pair Corralation between AP Moeller and Worldwide Healthcare

Assuming the 90 days trading horizon AP Moeller is expected to generate 2.36 times more return on investment than Worldwide Healthcare. However, AP Moeller is 2.36 times more volatile than Worldwide Healthcare Trust. It trades about 0.16 of its potential returns per unit of risk. Worldwide Healthcare Trust is currently generating about -0.09 per unit of risk. If you would invest  1,064,000  in AP Moeller on October 7, 2024 and sell it today you would earn a total of  178,500  from holding AP Moeller or generate 16.78% return on investment over 90 days.

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

AP Moeller   vs.  Worldwide Healthcare Trust

AP Moeller

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AP Moeller unveiled solid returns over the last few months and may actually be approaching a breakup point.

Worldwide Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worldwide Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with AP Moeller and Worldwide Healthcare

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

The idea behind AP Moeller and Worldwide Healthcare Trust 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 Global Correlations module to find global opportunities by holding instruments from different markets.