Correlation Between Blue Line and Absolute Health

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

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

Diversification Opportunities for Blue Line and Absolute Health

0.86

Correlation Coefficient

Blue Line  Absolute Health

Very poor diversification

The 3 months correlation between Blue and Absolute is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Blue Line Protection and Absolute Health and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Health and Blue Line 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 Blue Line Protection are associated (or correlated) with Absolute Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Health has no effect on the direction of Blue Line i.e., Blue Line and Absolute Health go up and down completely randomly.

Pair Corralation between Blue Line and Absolute Health

If you would invest  6.52  in Blue Line Protection on October 11, 2024 and sell it today you would lose (0.12) from holding Blue Line Protection or give up 1.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Blue Line Protection  vs.  Absolute Health and

Blue Line Protection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Line Protection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Blue Line is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Absolute Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Health and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Blue Line and Absolute Health

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

The idea behind Blue Line Protection and Absolute Health and 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.