Correlation Between GPT Healthcare and Zota Health

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

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

Diversification Opportunities for GPT Healthcare and Zota Health

0.63

Correlation Coefficient

GPT Healthcare  Zota Health

Poor diversification

The 3 months correlation between GPT and Zota is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and Zota Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zota Health Care 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 Zota Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zota Health Care has no effect on the direction of GPT Healthcare i.e., GPT Healthcare and Zota Health go up and down completely randomly.

Pair Corralation between GPT Healthcare and Zota Health

Assuming the 90 days trading horizon GPT Healthcare is expected to under-perform the Zota Health. But the stock apears to be less risky and, when comparing its historical volatility, GPT Healthcare is 2.69 times less risky than Zota Health. The stock trades about -0.06 of its potential returns per unit of risk. The Zota Health Care is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  61,240  in Zota Health Care on October 5, 2024 and sell it today you would earn a total of  19,005  from holding Zota Health Care or generate 31.03% return on investment over 90 days.

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

GPT Healthcare  vs.  Zota Health Care

GPT Healthcare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GPT Healthcare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, GPT Healthcare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zota Health Care

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zota Health Care are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Zota Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GPT Healthcare and Zota Health

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

The idea behind GPT Healthcare and Zota Health Care 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.