Correlation Between AJ Bell and Target Healthcare

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

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

Diversification Opportunities for AJ Bell and Target Healthcare

0.12

Correlation Coefficient

AJ Bell  Target Healthcare

Average diversification

The 3 months correlation between AJB and Target is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding AJ Bell plc and Target Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Healthcare REIT and AJ Bell 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 AJ Bell plc are associated (or correlated) with Target Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Healthcare REIT has no effect on the direction of AJ Bell i.e., AJ Bell and Target Healthcare go up and down completely randomly.

Pair Corralation between AJ Bell and Target Healthcare

Assuming the 90 days trading horizon AJ Bell plc is expected to generate 1.22 times more return on investment than Target Healthcare. However, AJ Bell is 1.22 times more volatile than Target Healthcare REIT. It trades about 0.12 of its potential returns per unit of risk. Target Healthcare REIT is currently generating about 0.05 per unit of risk. If you would invest  43,150  in AJ Bell plc on September 4, 2024 and sell it today you would earn a total of  4,850  from holding AJ Bell plc or generate 11.24% return on investment over 90 days.

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

AJ Bell plc  vs.  Target Healthcare REIT

AJ Bell plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AJ Bell plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, AJ Bell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Target Healthcare REIT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Target Healthcare REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Target Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AJ Bell and Target Healthcare

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

The idea behind AJ Bell plc and Target Healthcare REIT 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.