Correlation Between Primary Health and Overstock

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

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

Diversification Opportunities for Primary Health and Overstock

0.86

Correlation Coefficient

Primary Health  Overstock

Very poor diversification

The 3 months correlation between Primary and Overstock is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties and Overstock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstock and Primary 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 Primary Health Properties are associated (or correlated) with Overstock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstock has no effect on the direction of Primary Health i.e., Primary Health and Overstock go up and down completely randomly.

Pair Corralation between Primary Health and Overstock

Assuming the 90 days trading horizon Primary Health Properties is expected to generate 0.3 times more return on investment than Overstock. However, Primary Health Properties is 3.31 times less risky than Overstock. It trades about -0.01 of its potential returns per unit of risk. Overstock is currently generating about -0.02 per unit of risk. If you would invest  9,903  in Primary Health Properties on October 11, 2024 and sell it today you would lose (1,053) from holding Primary Health Properties or give up 10.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.4%
Values	Daily Returns

Primary Health Properties  vs.  Overstock

Primary Health Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primary Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Overstock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Overstock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Primary Health and Overstock

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

The idea behind Primary Health Properties and Overstock 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..