Correlation Between Gemz Corp and Absolute Health

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

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

Diversification Opportunities for Gemz Corp and Absolute Health

-0.52

Correlation Coefficient

Gemz Corp  Absolute Health

Excellent diversification

The 3 months correlation between Gemz and Absolute is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Gemz Corp and Absolute Health and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Health and Gemz Corp 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 Gemz Corp are associated (or correlated) with Absolute Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Health has no effect on the direction of Gemz Corp i.e., Gemz Corp and Absolute Health go up and down completely randomly.

Pair Corralation between Gemz Corp and Absolute Health

Given the investment horizon of 90 days Gemz Corp is expected to generate 1.22 times more return on investment than Absolute Health. However, Gemz Corp is 1.22 times more volatile than Absolute Health and. It trades about 0.12 of its potential returns per unit of risk. Absolute Health and is currently generating about -0.12 per unit of risk. If you would invest  0.03  in Gemz Corp on September 2, 2024 and sell it today you would earn a total of  0.02  from holding Gemz Corp or generate 66.67% return on investment over 90 days.

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

Gemz Corp  vs.  Absolute Health and

Gemz Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gemz Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gemz Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Absolute Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Health and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Gemz Corp and Absolute Health

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

The idea behind Gemz Corp and Absolute Health and 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.