Correlation Between Emergent Health and Earth Science

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

By analyzing existing cross correlation between Emergent Health Corp and Earth Science Tech, you can compare the effects of market volatilities on Emergent Health and Earth Science 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 Emergent Health with a short position of Earth Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emergent Health and Earth Science.

Diversification Opportunities for Emergent Health and Earth Science

0.63

Correlation Coefficient

Emergent Health  Earth Science

Poor diversification

The 3 months correlation between Emergent and Earth is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Health Corp and Earth Science Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earth Science Tech and Emergent 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 Emergent Health Corp are associated (or correlated) with Earth Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earth Science Tech has no effect on the direction of Emergent Health i.e., Emergent Health and Earth Science go up and down completely randomly.

Pair Corralation between Emergent Health and Earth Science

Given the investment horizon of 90 days Emergent Health Corp is expected to generate 0.76 times more return on investment than Earth Science. However, Emergent Health Corp is 1.32 times less risky than Earth Science. It trades about 0.04 of its potential returns per unit of risk. Earth Science Tech is currently generating about 0.01 per unit of risk. If you would invest  0.13  in Emergent Health Corp on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Emergent Health Corp or generate 0.0% return on investment over 90 days.

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

Emergent Health Corp  vs.  Earth Science Tech

Emergent Health Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Health Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Emergent Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Earth Science Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Earth Science Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Earth Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Emergent Health and Earth Science

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

The idea behind Emergent Health Corp and Earth Science Tech 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 CEOs Directory module to screen CEOs from public companies around the world.