Correlation Between Alignment Healthcare and Scilex Holding

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

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

Diversification Opportunities for Alignment Healthcare and Scilex Holding

0.11

Correlation Coefficient

Alignment Healthcare  Scilex Holding

Average diversification

The 3 months correlation between Alignment and Scilex is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Alignment Healthcare LLC and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding and Alignment 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 Alignment Healthcare LLC are associated (or correlated) with Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of Alignment Healthcare i.e., Alignment Healthcare and Scilex Holding go up and down completely randomly.

Pair Corralation between Alignment Healthcare and Scilex Holding

Given the investment horizon of 90 days Alignment Healthcare is expected to generate 2.28 times less return on investment than Scilex Holding. But when comparing it to its historical volatility, Alignment Healthcare LLC is 5.72 times less risky than Scilex Holding. It trades about 0.15 of its potential returns per unit of risk. Scilex Holding is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Scilex Holding on October 25, 2024 and sell it today you would lose (9.98) from holding Scilex Holding or give up 33.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Alignment Healthcare LLC  vs.  Scilex Holding

Alignment Healthcare LLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alignment Healthcare LLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, Alignment Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Scilex Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scilex Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Scilex Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alignment Healthcare and Scilex Holding

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

The idea behind Alignment Healthcare LLC and Scilex Holding 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.