Correlation Between EMedia Holdings and Life Healthcare

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

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

Diversification Opportunities for EMedia Holdings and Life Healthcare

-0.19

Correlation Coefficient

EMedia Holdings  Life Healthcare

Good diversification

The 3 months correlation between EMedia and Life is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding eMedia Holdings Limited and Life Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Healthcare and EMedia Holdings 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 eMedia Holdings Limited are associated (or correlated) with Life Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Healthcare has no effect on the direction of EMedia Holdings i.e., EMedia Holdings and Life Healthcare go up and down completely randomly.

Pair Corralation between EMedia Holdings and Life Healthcare

Assuming the 90 days trading horizon eMedia Holdings Limited is expected to generate 1.75 times more return on investment than Life Healthcare. However, EMedia Holdings is 1.75 times more volatile than Life Healthcare. It trades about -0.01 of its potential returns per unit of risk. Life Healthcare is currently generating about -0.03 per unit of risk. If you would invest  34,600  in eMedia Holdings Limited on October 26, 2024 and sell it today you would lose (1,600) from holding eMedia Holdings Limited or give up 4.62% of portfolio value over 90 days.

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

eMedia Holdings Limited  vs.  Life Healthcare

eMedia Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Life Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EMedia Holdings and Life Healthcare

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

The idea behind eMedia Holdings Limited and Life 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.