Correlation Between Eco Animal and Primary Health

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

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

Diversification Opportunities for Eco Animal and Primary Health

0.65

Correlation Coefficient

Eco Animal  Primary Health

Poor diversification

The 3 months correlation between Eco and Primary is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eco Animal Health and Primary Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primary Health Properties and Eco Animal 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 Eco Animal Health are associated (or correlated) with Primary Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primary Health Properties has no effect on the direction of Eco Animal i.e., Eco Animal and Primary Health go up and down completely randomly.

Pair Corralation between Eco Animal and Primary Health

Assuming the 90 days trading horizon Eco Animal Health is expected to under-perform the Primary Health. In addition to that, Eco Animal is 4.06 times more volatile than Primary Health Properties. It trades about -0.16 of its total potential returns per unit of risk. Primary Health Properties is currently generating about -0.09 per unit of volatility. If you would invest  9,907  in Primary Health Properties on September 12, 2024 and sell it today you would lose (607.00) from holding Primary Health Properties or give up 6.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Eco Animal Health  vs.  Primary Health Properties

Eco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental 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.

Primary Health Properties

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eco Animal and Primary Health

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

The idea behind Eco Animal Health and Primary Health Properties 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.