Correlation Between Action Construction and Healthcare Global

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

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

Diversification Opportunities for Action Construction and Healthcare Global

0.25

Correlation Coefficient

Action Construction  Healthcare Global

Modest diversification

The 3 months correlation between Action and Healthcare is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Action Construction Equipment and Healthcare Global Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Global and Action Construction 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 Action Construction Equipment are associated (or correlated) with Healthcare Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Global has no effect on the direction of Action Construction i.e., Action Construction and Healthcare Global go up and down completely randomly.

Pair Corralation between Action Construction and Healthcare Global

Assuming the 90 days trading horizon Action Construction Equipment is expected to generate 1.69 times more return on investment than Healthcare Global. However, Action Construction is 1.69 times more volatile than Healthcare Global Enterprises. It trades about 0.11 of its potential returns per unit of risk. Healthcare Global Enterprises is currently generating about 0.08 per unit of risk. If you would invest  37,198  in Action Construction Equipment on October 3, 2024 and sell it today you would earn a total of  113,542  from holding Action Construction Equipment or generate 305.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Action Construction Equipment  vs.  Healthcare Global Enterprises

Action Construction

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Action Construction Equipment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Action Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Healthcare Global

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Global Enterprises are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Healthcare Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Action Construction and Healthcare Global

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

The idea behind Action Construction Equipment and Healthcare Global Enterprises 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.