Correlation Between Austco Healthcare and Caravel Minerals

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

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

Diversification Opportunities for Austco Healthcare and Caravel Minerals

0.47

Correlation Coefficient

Austco Healthcare  Caravel Minerals

Very weak diversification

The 3 months correlation between Austco and Caravel is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Austco Healthcare and Caravel Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravel Minerals and Austco 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 Austco Healthcare are associated (or correlated) with Caravel Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravel Minerals has no effect on the direction of Austco Healthcare i.e., Austco Healthcare and Caravel Minerals go up and down completely randomly.

Pair Corralation between Austco Healthcare and Caravel Minerals

Assuming the 90 days trading horizon Austco Healthcare is expected to generate 0.91 times more return on investment than Caravel Minerals. However, Austco Healthcare is 1.1 times less risky than Caravel Minerals. It trades about 0.24 of its potential returns per unit of risk. Caravel Minerals is currently generating about 0.16 per unit of risk. If you would invest  28.00  in Austco Healthcare on October 24, 2024 and sell it today you would earn a total of  4.00  from holding Austco Healthcare or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Austco Healthcare  vs.  Caravel Minerals

Austco Healthcare

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Austco Healthcare are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Austco Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Caravel Minerals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caravel Minerals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caravel Minerals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austco Healthcare and Caravel Minerals

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

The idea behind Austco Healthcare and Caravel Minerals 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.