Correlation Between Healthcare Services and Entergy New

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

By analyzing existing cross correlation between Healthcare Services Group and Entergy New Orleans, you can compare the effects of market volatilities on Healthcare Services and Entergy New 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 Services with a short position of Entergy New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Services and Entergy New.

Diversification Opportunities for Healthcare Services and Entergy New

0.19

Correlation Coefficient

Healthcare Services  Entergy New

Average diversification

The 3 months correlation between Healthcare and Entergy is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Services Group and Entergy New Orleans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy New Orleans and Healthcare Services 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 Services Group are associated (or correlated) with Entergy New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy New Orleans has no effect on the direction of Healthcare Services i.e., Healthcare Services and Entergy New go up and down completely randomly.

Pair Corralation between Healthcare Services and Entergy New

Given the investment horizon of 90 days Healthcare Services Group is expected to under-perform the Entergy New. In addition to that, Healthcare Services is 2.18 times more volatile than Entergy New Orleans. It trades about -0.09 of its total potential returns per unit of risk. Entergy New Orleans is currently generating about -0.01 per unit of volatility. If you would invest  2,220  in Entergy New Orleans on December 30, 2024 and sell it today you would lose (14.00) from holding Entergy New Orleans or give up 0.63% of portfolio value over 90 days.

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

Healthcare Services Group  vs.  Entergy New Orleans

Healthcare Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Services Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Entergy New Orleans

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entergy New Orleans has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Entergy New is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Healthcare Services and Entergy New

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

The idea behind Healthcare Services Group and Entergy New Orleans 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.