Correlation Between Advanced Health and Sage Group

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

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

Diversification Opportunities for Advanced Health and Sage Group

-0.54

Correlation Coefficient

Advanced Health  Sage Group

Excellent diversification

The 3 months correlation between Advanced and Sage is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Health Intelligence and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group PLC and Advanced Health 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 Advanced Health Intelligence are associated (or correlated) with Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Advanced Health i.e., Advanced Health and Sage Group go up and down completely randomly.

Pair Corralation between Advanced Health and Sage Group

Assuming the 90 days horizon Advanced Health Intelligence is expected to under-perform the Sage Group. In addition to that, Advanced Health is 1.56 times more volatile than Sage Group PLC. It trades about -0.18 of its total potential returns per unit of risk. Sage Group PLC is currently generating about 0.15 per unit of volatility. If you would invest  5,219  in Sage Group PLC on October 23, 2024 and sell it today you would earn a total of  1,201  from holding Sage Group PLC or generate 23.01% return on investment over 90 days.

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

Advanced Health Intelligence  vs.  Sage Group PLC

Advanced Health Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Health Intelligence has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sage Group PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Group PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Sage Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Health and Sage Group

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

The idea behind Advanced Health Intelligence and Sage Group PLC 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.