Correlation Between HEALTHCARE REAL and RWE AG

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

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

Diversification Opportunities for HEALTHCARE REAL and RWE AG

0.4

Correlation Coefficient

HEALTHCARE REAL  RWE AG

Very weak diversification

The 3 months correlation between HEALTHCARE and RWE is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHCARE REAL A and RWE AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG and HEALTHCARE REAL 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 REAL A are associated (or correlated) with RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG has no effect on the direction of HEALTHCARE REAL i.e., HEALTHCARE REAL and RWE AG go up and down completely randomly.

Pair Corralation between HEALTHCARE REAL and RWE AG

Assuming the 90 days horizon HEALTHCARE REAL A is expected to under-perform the RWE AG. But the stock apears to be less risky and, when comparing its historical volatility, HEALTHCARE REAL A is 1.06 times less risky than RWE AG. The stock trades about -0.08 of its potential returns per unit of risk. The RWE AG is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,075  in RWE AG on December 5, 2024 and sell it today you would lose (40.00) from holding RWE AG or give up 1.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

HEALTHCARE REAL A  vs.  RWE AG

HEALTHCARE REAL A

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEALTHCARE REAL A 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.

RWE AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days RWE AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, RWE AG is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HEALTHCARE REAL and RWE AG

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

The idea behind HEALTHCARE REAL A and RWE AG 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..