Correlation Between CHC Healthcare and TaiMed Biologics

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

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

Diversification Opportunities for CHC Healthcare and TaiMed Biologics

-0.45

Correlation Coefficient

CHC Healthcare  TaiMed Biologics

Very good diversification

The 3 months correlation between CHC and TaiMed is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding CHC Healthcare Group and TaiMed Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TaiMed Biologics and CHC 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 CHC Healthcare Group are associated (or correlated) with TaiMed Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TaiMed Biologics has no effect on the direction of CHC Healthcare i.e., CHC Healthcare and TaiMed Biologics go up and down completely randomly.

Pair Corralation between CHC Healthcare and TaiMed Biologics

Assuming the 90 days trading horizon CHC Healthcare is expected to generate 25.76 times less return on investment than TaiMed Biologics. But when comparing it to its historical volatility, CHC Healthcare Group is 1.27 times less risky than TaiMed Biologics. It trades about 0.0 of its potential returns per unit of risk. TaiMed Biologics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,690  in TaiMed Biologics on October 12, 2024 and sell it today you would earn a total of  2,360  from holding TaiMed Biologics or generate 35.28% return on investment over 90 days.

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

CHC Healthcare Group  vs.  TaiMed Biologics

CHC Healthcare Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHC Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

TaiMed Biologics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TaiMed Biologics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TaiMed Biologics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHC Healthcare and TaiMed Biologics

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

The idea behind CHC Healthcare Group and TaiMed Biologics 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.