Correlation Between GreenTech Environmental and Healthcare

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

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

Diversification Opportunities for GreenTech Environmental and Healthcare

-0.5

Correlation Coefficient

GreenTech Environmental  Healthcare

Very good diversification

The 3 months correlation between GreenTech and Healthcare is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding GreenTech Environmental Co and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare and GreenTech Environmental 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 GreenTech Environmental Co are associated (or correlated) with Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of GreenTech Environmental i.e., GreenTech Environmental and Healthcare go up and down completely randomly.

Pair Corralation between GreenTech Environmental and Healthcare

Assuming the 90 days trading horizon GreenTech Environmental Co is expected to generate 1.59 times more return on investment than Healthcare. However, GreenTech Environmental is 1.59 times more volatile than Healthcare Co. It trades about 0.14 of its potential returns per unit of risk. Healthcare Co is currently generating about -0.12 per unit of risk. If you would invest  1,389  in GreenTech Environmental Co on December 27, 2024 and sell it today you would earn a total of  335.00  from holding GreenTech Environmental Co or generate 24.12% return on investment over 90 days.

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

GreenTech Environmental Co  vs.  Healthcare Co

GreenTech Environmental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GreenTech Environmental Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GreenTech Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GreenTech Environmental and Healthcare

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

The idea behind GreenTech Environmental Co and Healthcare 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.