Correlation Between Alkali Metals and Global Health

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

By analyzing existing cross correlation between Alkali Metals Limited and Global Health Limited, you can compare the effects of market volatilities on Alkali Metals 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 Alkali Metals with a short position of Global Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alkali Metals and Global Health.

Diversification Opportunities for Alkali Metals and Global Health

-0.16

Correlation Coefficient

Alkali Metals  Global Health

Good diversification

The 3 months correlation between Alkali and Global is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and Global Health Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health Limited and Alkali Metals 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 Alkali Metals Limited 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 Limited has no effect on the direction of Alkali Metals i.e., Alkali Metals and Global Health go up and down completely randomly.

Pair Corralation between Alkali Metals and Global Health

Assuming the 90 days trading horizon Alkali Metals Limited is expected to generate 1.23 times more return on investment than Global Health. However, Alkali Metals is 1.23 times more volatile than Global Health Limited. It trades about -0.04 of its potential returns per unit of risk. Global Health Limited is currently generating about -0.17 per unit of risk. If you would invest  11,629  in Alkali Metals Limited on October 5, 2024 and sell it today you would lose (190.00) from holding Alkali Metals Limited or give up 1.63% of portfolio value over 90 days.

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

Alkali Metals Limited  vs.  Global Health Limited

Alkali Metals Limited

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alkali Metals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Global Health Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Global Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkali Metals and Global Health

The main advantage of trading using opposite Alkali Metals and Global Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alkali Metals 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 Alkali Metals Limited and Global Health Limited 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.