Correlation Between Global Health and Australia

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

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

Diversification Opportunities for Global Health and Australia

-0.18

Correlation Coefficient

Global Health  Australia

Good diversification

The 3 months correlation between Global and Australia is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Global Health and Australia and New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australia and New 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 Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australia and New has no effect on the direction of Global Health i.e., Global Health and Australia go up and down completely randomly.

Pair Corralation between Global Health and Australia

Assuming the 90 days trading horizon Global Health is expected to under-perform the Australia. In addition to that, Global Health is 2.6 times more volatile than Australia and New. It trades about -0.02 of its total potential returns per unit of risk. Australia and New is currently generating about -0.02 per unit of volatility. If you would invest  3,090  in Australia and New on October 24, 2024 and sell it today you would lose (68.00) from holding Australia and New or give up 2.2% of portfolio value over 90 days.

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

Global Health  vs.  Australia and New

Global Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Health has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Australia and New

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Global Health and Australia and New 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.