Correlation Between Global Tech and National Health

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

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

Diversification Opportunities for Global Tech and National Health

0.07

Correlation Coefficient

Global Tech  National Health

Significant diversification

The 3 months correlation between Global and National is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Global Tech Industries and National Health Scan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Scan and Global Tech 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 Tech Industries are associated (or correlated) with National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Scan has no effect on the direction of Global Tech i.e., Global Tech and National Health go up and down completely randomly.

Pair Corralation between Global Tech and National Health

Given the investment horizon of 90 days Global Tech Industries is expected to generate 4.97 times more return on investment than National Health. However, Global Tech is 4.97 times more volatile than National Health Scan. It trades about 0.2 of its potential returns per unit of risk. National Health Scan is currently generating about 0.14 per unit of risk. If you would invest  11.00  in Global Tech Industries on September 1, 2024 and sell it today you would lose (7.99) from holding Global Tech Industries or give up 72.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Global Tech Industries  vs.  National Health Scan

Global Tech Industries

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Tech Industries are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal forward indicators, Global Tech demonstrated solid returns over the last few months and may actually be approaching a breakup point.

National Health Scan

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Global Tech and National Health

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

The idea behind Global Tech Industries and National Health Scan 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.