Correlation Between Healthcare and East Money

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

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

Diversification Opportunities for Healthcare and East Money

0.76

Correlation Coefficient

Healthcare  East Money

Poor diversification

The 3 months correlation between Healthcare and East is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Co and East Money Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Money Information and 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 Healthcare Co are associated (or correlated) with East Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Money Information has no effect on the direction of Healthcare i.e., Healthcare and East Money go up and down completely randomly.

Pair Corralation between Healthcare and East Money

Assuming the 90 days trading horizon Healthcare Co is expected to generate 1.11 times more return on investment than East Money. However, Healthcare is 1.11 times more volatile than East Money Information. It trades about -0.19 of its potential returns per unit of risk. East Money Information is currently generating about -0.37 per unit of risk. If you would invest  746.00  in Healthcare Co on October 11, 2024 and sell it today you would lose (91.00) from holding Healthcare Co or give up 12.2% of portfolio value over 90 days.

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

Healthcare Co  vs.  East Money Information

Healthcare

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

East Money Information

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East Money Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East Money sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Healthcare and East Money

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

The idea behind Healthcare Co and East Money Information 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.