Correlation Between Health Care and Aston/river Road

Can any of the company-specific risk be diversified away by investing in both Health Care and Aston/river Road 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 Health Care and Aston/river Road into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Health Care Ultrasector and Astonriver Road Independent, you can compare the effects of market volatilities on Health Care and Aston/river Road 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 Health Care with a short position of Aston/river Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Aston/river Road.

Diversification Opportunities for Health Care and Aston/river Road

0.53

Correlation Coefficient

Health Care  Aston/river Road

Very weak diversification

The 3 months correlation between Health and Aston/river is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Astonriver Road Independent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astonriver Road Inde and Health Care 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 Health Care Ultrasector are associated (or correlated) with Aston/river Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astonriver Road Inde has no effect on the direction of Health Care i.e., Health Care and Aston/river Road go up and down completely randomly.

Pair Corralation between Health Care and Aston/river Road

Assuming the 90 days horizon Health Care is expected to generate 1.06 times less return on investment than Aston/river Road. In addition to that, Health Care is 1.08 times more volatile than Astonriver Road Independent. It trades about 0.11 of its total potential returns per unit of risk. Astonriver Road Independent is currently generating about 0.12 per unit of volatility. If you would invest  1,022  in Astonriver Road Independent on December 23, 2024 and sell it today you would earn a total of  81.00  from holding Astonriver Road Independent or generate 7.93% return on investment over 90 days.

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

Health Care Ultrasector  vs.  Astonriver Road Independent

Health Care Ultrasector

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Health Care Ultrasector are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Health Care may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Astonriver Road Inde

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astonriver Road Independent are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aston/river Road may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Health Care and Aston/river Road

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

The idea behind Health Care Ultrasector and Astonriver Road Independent 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.