Correlation Between China Health and BlackRock Health

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

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

Diversification Opportunities for China Health and BlackRock Health

0.29

Correlation Coefficient

China Health  BlackRock Health

Modest diversification

The 3 months correlation between China and BlackRock is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and BlackRock Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Health Sciences and China Health 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 China Health Management are associated (or correlated) with BlackRock Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Health Sciences has no effect on the direction of China Health i.e., China Health and BlackRock Health go up and down completely randomly.

Pair Corralation between China Health and BlackRock Health

Given the investment horizon of 90 days China Health Management is expected to under-perform the BlackRock Health. In addition to that, China Health is 13.05 times more volatile than BlackRock Health Sciences. It trades about -0.08 of its total potential returns per unit of risk. BlackRock Health Sciences is currently generating about -0.09 per unit of volatility. If you would invest  4,175  in BlackRock Health Sciences on September 2, 2024 and sell it today you would lose (184.00) from holding BlackRock Health Sciences or give up 4.41% of portfolio value over 90 days.

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

China Health Management  vs.  BlackRock Health Sciences

China Health Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BlackRock Health Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock Health Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, BlackRock Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with China Health and BlackRock Health

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

The idea behind China Health Management and BlackRock Health Sciences 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.