Correlation Between Austco Healthcare and Global Health

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

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

Diversification Opportunities for Austco Healthcare and Global Health

0.45

Correlation Coefficient

Austco Healthcare  Global Health

Very weak diversification

The 3 months correlation between Austco and Global is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Austco Healthcare and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health 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 Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health has no effect on the direction of Austco Healthcare i.e., Austco Healthcare and Global Health go up and down completely randomly.

Pair Corralation between Austco Healthcare and Global Health

Assuming the 90 days trading horizon Austco Healthcare is expected to generate 1.23 times less return on investment than Global Health. But when comparing it to its historical volatility, Austco Healthcare is 1.15 times less risky than Global Health. It trades about 0.08 of its potential returns per unit of risk. Global Health is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Global Health on September 5, 2024 and sell it today you would earn a total of  2.00  from holding Global Health or generate 16.67% return on investment over 90 days.

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

Austco Healthcare  vs.  Global Health

Austco Healthcare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Austco Healthcare are ranked lower than 6 (%) 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.

Global Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Global Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austco Healthcare and Global Health

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

The idea behind Austco Healthcare and Global Health 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.