Correlation Between Healthcare Triangle and Newtopia

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

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

Diversification Opportunities for Healthcare Triangle and Newtopia

0.47

Correlation Coefficient

Healthcare Triangle  Newtopia

Very weak diversification

The 3 months correlation between Healthcare and Newtopia is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Triangle and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia and Healthcare Triangle 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 Triangle are associated (or correlated) with Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Healthcare Triangle i.e., Healthcare Triangle and Newtopia go up and down completely randomly.

Pair Corralation between Healthcare Triangle and Newtopia

Given the investment horizon of 90 days Healthcare Triangle is expected to under-perform the Newtopia. But the stock apears to be less risky and, when comparing its historical volatility, Healthcare Triangle is 1.36 times less risky than Newtopia. The stock trades about -0.03 of its potential returns per unit of risk. The Newtopia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.14  in Newtopia on December 30, 2024 and sell it today you would lose (0.09) from holding Newtopia or give up 64.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

Healthcare Triangle  vs.  Newtopia

Healthcare Triangle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Triangle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Newtopia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newtopia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Newtopia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Healthcare Triangle and Newtopia

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

The idea behind Healthcare Triangle and Newtopia 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.