Correlation Between Microequities Asset and Global Health

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

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

Diversification Opportunities for Microequities Asset and Global Health

0.33

Correlation Coefficient

Microequities Asset  Global Health

Weak diversification

The 3 months correlation between Microequities and Global is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microequities Asset Management and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health and Microequities Asset 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 Microequities Asset Management are associated (or correlated) with Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health has no effect on the direction of Microequities Asset i.e., Microequities Asset and Global Health go up and down completely randomly.

Pair Corralation between Microequities Asset and Global Health

Assuming the 90 days trading horizon Microequities Asset Management is expected to generate 1.17 times more return on investment than Global Health. However, Microequities Asset is 1.17 times more volatile than Global Health. It trades about 0.04 of its potential returns per unit of risk. Global Health is currently generating about 0.01 per unit of risk. If you would invest  56.00  in Microequities Asset Management on November 28, 2024 and sell it today you would earn a total of  1.00  from holding Microequities Asset Management or generate 1.79% return on investment over 90 days.

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

Microequities Asset Management  vs.  Global Health

Microequities Asset

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microequities Asset Management are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Microequities Asset unveiled solid returns over the last few months and may actually be approaching a breakup point.

Global Health

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Global Health may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Microequities Asset and Global Health

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

The idea behind Microequities Asset Management and Global Health 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.