Correlation Between FSA and Global Health

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

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

Diversification Opportunities for FSA and Global Health

0.36

Correlation Coefficient

FSA  Global Health

Weak diversification

The 3 months correlation between FSA and Global is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding FSA Group and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health and FSA 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 FSA Group 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 FSA i.e., FSA and Global Health go up and down completely randomly.

Pair Corralation between FSA and Global Health

Assuming the 90 days trading horizon FSA Group is expected to under-perform the Global Health. But the stock apears to be less risky and, when comparing its historical volatility, FSA Group is 3.51 times less risky than Global Health. The stock trades about -0.01 of its potential returns per unit of risk. The Global Health is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Global Health on October 4, 2024 and sell it today you would earn a total of  2.00  from holding Global Health or generate 16.67% return on investment over 90 days.

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

FSA Group  vs.  Global Health

FSA Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FSA Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FSA 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 FSA and Global Health

The main advantage of trading using opposite FSA and Global Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FSA 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 FSA Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.