Correlation Between EROAD and Global Health

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

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

Diversification Opportunities for EROAD and Global Health

0.0

Correlation Coefficient

EROAD  Global Health

Pay attention - limited upside

The 3 months correlation between EROAD and Global is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health and EROAD 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 EROAD are associated (or correlated) with Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health has no effect on the direction of EROAD i.e., EROAD and Global Health go up and down completely randomly.

Pair Corralation between EROAD and Global Health

Assuming the 90 days trading horizon EROAD is expected to generate 1.05 times more return on investment than Global Health. However, EROAD is 1.05 times more volatile than Global Health. It trades about 0.02 of its potential returns per unit of risk. Global Health is currently generating about 0.02 per unit of risk. If you would invest  102.00  in EROAD on October 1, 2024 and sell it today you would earn a total of  1.00  from holding EROAD or generate 0.98% return on investment over 90 days.

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

EROAD  vs.  Global Health

EROAD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EROAD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, EROAD is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Global Health

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Global Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EROAD and Global Health

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

The idea behind EROAD and Global Health 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.