Correlation Between Life Healthcare and Nedbank

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

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

Diversification Opportunities for Life Healthcare and Nedbank

0.5

Correlation Coefficient

Life Healthcare  Nedbank

Very weak diversification

The 3 months correlation between Life and Nedbank is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group and Life Healthcare 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 Life Healthcare are associated (or correlated) with Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of Life Healthcare i.e., Life Healthcare and Nedbank go up and down completely randomly.

Pair Corralation between Life Healthcare and Nedbank

Assuming the 90 days trading horizon Life Healthcare is expected to generate 5.42 times less return on investment than Nedbank. In addition to that, Life Healthcare is 1.61 times more volatile than Nedbank Group. It trades about 0.01 of its total potential returns per unit of risk. Nedbank Group is currently generating about 0.06 per unit of volatility. If you would invest  1,998,730  in Nedbank Group on October 23, 2024 and sell it today you would earn a total of  829,870  from holding Nedbank Group or generate 41.52% return on investment over 90 days.

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

Life Healthcare  vs.  Nedbank Group

Life Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Nedbank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nedbank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Nedbank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Life Healthcare and Nedbank

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

The idea behind Life Healthcare and Nedbank Group 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 CEOs Directory module to screen CEOs from public companies around the world.