Correlation Between Healthcare and Humanwell Healthcare

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

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

Diversification Opportunities for Healthcare and Humanwell Healthcare

0.83

Correlation Coefficient

Healthcare  Humanwell Healthcare

Very poor diversification

The 3 months correlation between Healthcare and Humanwell is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Co and Humanwell Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humanwell Healthcare 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 Humanwell Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humanwell Healthcare has no effect on the direction of Healthcare i.e., Healthcare and Humanwell Healthcare go up and down completely randomly.

Pair Corralation between Healthcare and Humanwell Healthcare

Assuming the 90 days trading horizon Healthcare Co is expected to under-perform the Humanwell Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Healthcare Co is 1.24 times less risky than Humanwell Healthcare. The stock trades about -0.11 of its potential returns per unit of risk. The Humanwell Healthcare Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,396  in Humanwell Healthcare Group on December 29, 2024 and sell it today you would lose (270.00) from holding Humanwell Healthcare Group or give up 11.27% of portfolio value over 90 days.

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

Healthcare Co  vs.  Humanwell Healthcare Group

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.

Humanwell Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Humanwell Healthcare Group 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 Healthcare and Humanwell Healthcare

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

The idea behind Healthcare Co and Humanwell Healthcare Group 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.