Correlation Between CA Sales and Life Healthcare

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

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

Diversification Opportunities for CA Sales and Life Healthcare

-0.09

Correlation Coefficient

CA Sales  Life Healthcare

Good diversification

The 3 months correlation between CAA and Life is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding CA Sales Holdings and Life Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Healthcare and CA Sales 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 CA Sales Holdings are associated (or correlated) with Life Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Healthcare has no effect on the direction of CA Sales i.e., CA Sales and Life Healthcare go up and down completely randomly.

Pair Corralation between CA Sales and Life Healthcare

Assuming the 90 days trading horizon CA Sales Holdings is expected to generate 0.98 times more return on investment than Life Healthcare. However, CA Sales Holdings is 1.02 times less risky than Life Healthcare. It trades about 0.09 of its potential returns per unit of risk. Life Healthcare is currently generating about 0.01 per unit of risk. If you would invest  66,022  in CA Sales Holdings on October 10, 2024 and sell it today you would earn a total of  96,578  from holding CA Sales Holdings or generate 146.28% return on investment over 90 days.

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

CA Sales Holdings  vs.  Life Healthcare

CA Sales Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CA Sales Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CA Sales exhibited solid returns over the last few months and may actually be approaching a breakup point.

Life Healthcare

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Life Healthcare are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Life Healthcare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CA Sales and Life Healthcare

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

The idea behind CA Sales Holdings and Life Healthcare 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.