Correlation Between Carlyle and Healthcare

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

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

Diversification Opportunities for Carlyle and Healthcare

-0.59

Correlation Coefficient

Carlyle  Healthcare

Excellent diversification

The 3 months correlation between Carlyle and Healthcare is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Healthcare AI Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare AI Acquisition and Carlyle 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 Carlyle Group are associated (or correlated) with Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare AI Acquisition has no effect on the direction of Carlyle i.e., Carlyle and Healthcare go up and down completely randomly.

Pair Corralation between Carlyle and Healthcare

Allowing for the 90-day total investment horizon Carlyle is expected to generate 3.92 times less return on investment than Healthcare. But when comparing it to its historical volatility, Carlyle Group is 14.0 times less risky than Healthcare. It trades about 0.26 of its potential returns per unit of risk. Healthcare AI Acquisition is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.03  in Healthcare AI Acquisition on September 12, 2024 and sell it today you would lose (0.86) from holding Healthcare AI Acquisition or give up 42.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.88%
Values	Daily Returns

Carlyle Group  vs.  Healthcare AI Acquisition

Carlyle Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Healthcare AI Acquisition

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Healthcare AI Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Healthcare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and Healthcare

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

The idea behind Carlyle Group and Healthcare AI Acquisition 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.