Correlation Between Regional Health and Pacific Gas

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

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

Diversification Opportunities for Regional Health and Pacific Gas

-0.26

Correlation Coefficient

Regional Health  Pacific Gas

Very good diversification

The 3 months correlation between Regional and Pacific is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Regional Health Properties and Pacific Gas and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas and Regional 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 Regional Health Properties are associated (or correlated) with Pacific Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Gas has no effect on the direction of Regional Health i.e., Regional Health and Pacific Gas go up and down completely randomly.

Pair Corralation between Regional Health and Pacific Gas

Considering the 90-day investment horizon Regional Health Properties is expected to generate 18.3 times more return on investment than Pacific Gas. However, Regional Health is 18.3 times more volatile than Pacific Gas and. It trades about 0.14 of its potential returns per unit of risk. Pacific Gas and is currently generating about -0.04 per unit of risk. If you would invest  148.00  in Regional Health Properties on December 22, 2024 and sell it today you would earn a total of  84.00  from holding Regional Health Properties or generate 56.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.73%
Values	Daily Returns

Regional Health Properties  vs.  Pacific Gas and

Regional Health Prop

Risk-Adjusted Performance

OK

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical indicators, Regional Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pacific Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Gas and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Pacific Gas is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Regional Health and Pacific Gas

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

The idea behind Regional Health Properties and Pacific Gas and 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.