Correlation Between NMC Health and Cielo SA

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

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

Diversification Opportunities for NMC Health and Cielo SA

0.6

Correlation Coefficient

NMC Health  Cielo SA

Poor diversification

The 3 months correlation between NMC and Cielo is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NMC Health PLC and Cielo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cielo SA and NMC 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 NMC Health PLC are associated (or correlated) with Cielo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cielo SA has no effect on the direction of NMC Health i.e., NMC Health and Cielo SA go up and down completely randomly.

Pair Corralation between NMC Health and Cielo SA

If you would invest  84.00  in Cielo SA on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Cielo SA or generate 0.0% return on investment over 90 days.

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

NMC Health PLC  vs.  Cielo SA

NMC Health PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMC Health PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, NMC Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cielo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cielo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Cielo SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NMC Health and Cielo SA

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

The idea behind NMC Health PLC and Cielo SA 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.