Correlation Between Energy Resources and Austco Healthcare

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

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

Diversification Opportunities for Energy Resources and Austco Healthcare

-0.06

Correlation Coefficient

Energy Resources  Austco Healthcare

Good diversification

The 3 months correlation between Energy and Austco is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and Austco Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austco Healthcare and Energy Resources 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 Energy Resources 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 Energy Resources i.e., Energy Resources and Austco Healthcare go up and down completely randomly.

Pair Corralation between Energy Resources and Austco Healthcare

Assuming the 90 days trading horizon Energy Resources is expected to generate 9.67 times more return on investment than Austco Healthcare. However, Energy Resources is 9.67 times more volatile than Austco Healthcare. It trades about 0.1 of its potential returns per unit of risk. Austco Healthcare is currently generating about 0.08 per unit of risk. If you would invest  0.70  in Energy Resources on September 4, 2024 and sell it today you would lose (0.40) from holding Energy Resources or give up 57.14% of portfolio value over 90 days.

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

Energy Resources  vs.  Austco Healthcare

Energy Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Energy Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Austco Healthcare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Austco Healthcare are ranked lower than 6 (%) 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 Energy Resources and Austco Healthcare

The main advantage of trading using opposite Energy Resources and Austco Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Resources 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 Energy Resources 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.