Correlation Between Newtopia and Healthcare Triangle

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

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

Diversification Opportunities for Newtopia and Healthcare Triangle

0.47

Correlation Coefficient

Newtopia  Healthcare Triangle

Very weak diversification

The 3 months correlation between Newtopia and Healthcare is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Newtopia and Healthcare Triangle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Triangle and Newtopia 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 Newtopia are associated (or correlated) with Healthcare Triangle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Triangle has no effect on the direction of Newtopia i.e., Newtopia and Healthcare Triangle go up and down completely randomly.

Pair Corralation between Newtopia and Healthcare Triangle

Assuming the 90 days horizon Newtopia is expected to generate 1.36 times more return on investment than Healthcare Triangle. However, Newtopia is 1.36 times more volatile than Healthcare Triangle. It trades about 0.07 of its potential returns per unit of risk. Healthcare Triangle is currently generating about -0.03 per unit of risk. If you would invest  0.14  in Newtopia on December 30, 2024 and sell it today you would lose (0.09) from holding Newtopia or give up 64.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

Newtopia  vs.  Healthcare Triangle

Newtopia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newtopia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Newtopia reported solid returns over the last few months and may actually be approaching a breakup point.

Healthcare Triangle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Triangle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Newtopia and Healthcare Triangle

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

The idea behind Newtopia and Healthcare Triangle 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.