Correlation Between Collins Foods and Austco Healthcare

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

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

Diversification Opportunities for Collins Foods and Austco Healthcare

-0.58

Correlation Coefficient

Collins Foods  Austco Healthcare

Excellent diversification

The 3 months correlation between Collins and Austco is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Austco Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austco Healthcare and Collins Foods 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 Collins Foods are associated (or correlated) with Austco Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austco Healthcare has no effect on the direction of Collins Foods i.e., Collins Foods and Austco Healthcare go up and down completely randomly.

Pair Corralation between Collins Foods and Austco Healthcare

Assuming the 90 days trading horizon Collins Foods is expected to generate 16.71 times less return on investment than Austco Healthcare. But when comparing it to its historical volatility, Collins Foods is 1.73 times less risky than Austco Healthcare. It trades about 0.01 of its potential returns per unit of risk. Austco Healthcare is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Austco Healthcare on October 5, 2024 and sell it today you would earn a total of  17.00  from holding Austco Healthcare or generate 130.77% return on investment over 90 days.

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

Collins Foods  vs.  Austco Healthcare

Collins Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collins Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Austco Healthcare

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austco Healthcare are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Austco Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Collins Foods and Austco Healthcare

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

The idea behind Collins Foods and Austco 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.