Correlation Between Max Healthcare and GPT Healthcare

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

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

Diversification Opportunities for Max Healthcare and GPT Healthcare

0.62

Correlation Coefficient

Max Healthcare  GPT Healthcare

Poor diversification

The 3 months correlation between Max and GPT is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Max Healthcare Institute and GPT Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT Healthcare and Max 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 Max Healthcare Institute are associated (or correlated) with GPT Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Healthcare has no effect on the direction of Max Healthcare i.e., Max Healthcare and GPT Healthcare go up and down completely randomly.

Pair Corralation between Max Healthcare and GPT Healthcare

Assuming the 90 days trading horizon Max Healthcare Institute is expected to generate 1.35 times more return on investment than GPT Healthcare. However, Max Healthcare is 1.35 times more volatile than GPT Healthcare. It trades about -0.08 of its potential returns per unit of risk. GPT Healthcare is currently generating about -0.46 per unit of risk. If you would invest  104,385  in Max Healthcare Institute on December 1, 2024 and sell it today you would lose (6,575) from holding Max Healthcare Institute or give up 6.3% of portfolio value over 90 days.

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

Max Healthcare Institute  vs.  GPT Healthcare

Max Healthcare Institute

Risk-Adjusted Performance

Very Weak

Over the last 90 days Max Healthcare Institute has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Max Healthcare is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

GPT Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Max Healthcare and GPT Healthcare

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

The idea behind Max Healthcare Institute and GPT Healthcare 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.