Correlation Between Global Health and Advanced Braking

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

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

Diversification Opportunities for Global Health and Advanced Braking

-0.41

Correlation Coefficient

Global Health  Advanced Braking

Very good diversification

The 3 months correlation between Global and Advanced is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Global Health and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec and Global 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 Global Health are associated (or correlated) with Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of Global Health i.e., Global Health and Advanced Braking go up and down completely randomly.

Pair Corralation between Global Health and Advanced Braking

Assuming the 90 days trading horizon Global Health is expected to generate 0.87 times more return on investment than Advanced Braking. However, Global Health is 1.15 times less risky than Advanced Braking. It trades about 0.13 of its potential returns per unit of risk. Advanced Braking Technology is currently generating about 0.02 per unit of risk. If you would invest  13.00  in Global Health on September 20, 2024 and sell it today you would earn a total of  1.00  from holding Global Health or generate 7.69% return on investment over 90 days.

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

Global Health  vs.  Advanced Braking Technology

Global Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Global Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Advanced Braking Tec

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Braking Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Advanced Braking unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Health and Advanced Braking

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

The idea behind Global Health and Advanced Braking Technology 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.