Correlation Between GPT Healthcare and EIH Associated

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

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

Diversification Opportunities for GPT Healthcare and EIH Associated

0.85

Correlation Coefficient

GPT Healthcare  EIH Associated

Very poor diversification

The 3 months correlation between GPT and EIH is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels and GPT Healthcare 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 GPT Healthcare are associated (or correlated) with EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of GPT Healthcare i.e., GPT Healthcare and EIH Associated go up and down completely randomly.

Pair Corralation between GPT Healthcare and EIH Associated

Assuming the 90 days trading horizon GPT Healthcare is expected to generate 3.51 times less return on investment than EIH Associated. But when comparing it to its historical volatility, GPT Healthcare is 1.25 times less risky than EIH Associated. It trades about 0.02 of its potential returns per unit of risk. EIH Associated Hotels is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  39,105  in EIH Associated Hotels on September 30, 2024 and sell it today you would earn a total of  3,505  from holding EIH Associated Hotels or generate 8.96% return on investment over 90 days.

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

GPT Healthcare  vs.  EIH Associated Hotels

GPT Healthcare

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GPT Healthcare are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, GPT Healthcare is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

EIH Associated Hotels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, EIH Associated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GPT Healthcare and EIH Associated

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

The idea behind GPT Healthcare and EIH Associated Hotels 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .