Correlation Between Healthcare Global and Investment Trust

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

By analyzing existing cross correlation between Healthcare Global Enterprises and The Investment Trust, you can compare the effects of market volatilities on Healthcare Global and Investment Trust 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 Healthcare Global with a short position of Investment Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Global and Investment Trust.

Diversification Opportunities for Healthcare Global and Investment Trust

0.6

Correlation Coefficient

Healthcare Global  Investment Trust

Poor diversification

The 3 months correlation between Healthcare and Investment is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Global Enterprises and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust and Healthcare Global 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 Healthcare Global Enterprises are associated (or correlated) with Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of Healthcare Global i.e., Healthcare Global and Investment Trust go up and down completely randomly.

Pair Corralation between Healthcare Global and Investment Trust

Assuming the 90 days trading horizon Healthcare Global Enterprises is expected to generate 0.69 times more return on investment than Investment Trust. However, Healthcare Global Enterprises is 1.46 times less risky than Investment Trust. It trades about 0.23 of its potential returns per unit of risk. The Investment Trust is currently generating about 0.07 per unit of risk. If you would invest  38,685  in Healthcare Global Enterprises on September 2, 2024 and sell it today you would earn a total of  11,555  from holding Healthcare Global Enterprises or generate 29.87% return on investment over 90 days.

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

Healthcare Global Enterprises  vs.  The Investment Trust

Healthcare Global

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Global Enterprises are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Healthcare Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Investment Trust

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Healthcare Global and Investment Trust

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

The idea behind Healthcare Global Enterprises and The Investment Trust 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.