Correlation Between GPT Healthcare and Rainbow Childrens

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

By analyzing existing cross correlation between GPT Healthcare and Rainbow Childrens Medicare, you can compare the effects of market volatilities on GPT Healthcare and Rainbow Childrens 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 Rainbow Childrens. Check out your portfolio center. Please also check ongoing floating volatility patterns of GPT Healthcare and Rainbow Childrens.

Diversification Opportunities for GPT Healthcare and Rainbow Childrens

0.17

Correlation Coefficient

GPT Healthcare  Rainbow Childrens

Average diversification

The 3 months correlation between GPT and Rainbow is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and Rainbow Childrens Medicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rainbow Childrens 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 Rainbow Childrens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rainbow Childrens has no effect on the direction of GPT Healthcare i.e., GPT Healthcare and Rainbow Childrens go up and down completely randomly.

Pair Corralation between GPT Healthcare and Rainbow Childrens

Assuming the 90 days trading horizon GPT Healthcare is expected to generate 1.11 times more return on investment than Rainbow Childrens. However, GPT Healthcare is 1.11 times more volatile than Rainbow Childrens Medicare. It trades about 0.04 of its potential returns per unit of risk. Rainbow Childrens Medicare is currently generating about -0.38 per unit of risk. If you would invest  18,222  in GPT Healthcare on October 4, 2024 and sell it today you would earn a total of  168.00  from holding GPT Healthcare or generate 0.92% return on investment over 90 days.

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

GPT Healthcare  vs.  Rainbow Childrens Medicare

GPT Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GPT Healthcare are ranked lower than 3 (%) 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.

Rainbow Childrens

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Childrens Medicare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Rainbow Childrens may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GPT Healthcare and Rainbow Childrens

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

The idea behind GPT Healthcare and Rainbow Childrens Medicare 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.