Correlation Between ResMed and SHIP HEALTHCARE

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

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

Diversification Opportunities for ResMed and SHIP HEALTHCARE

-0.44

Correlation Coefficient

ResMed  SHIP HEALTHCARE

Very good diversification

The 3 months correlation between ResMed and SHIP is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ResMed Inc and SHIP HEALTHCARE HLDGINC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIP HEALTHCARE HLDGINC and ResMed 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 ResMed Inc are associated (or correlated) with SHIP HEALTHCARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIP HEALTHCARE HLDGINC has no effect on the direction of ResMed i.e., ResMed and SHIP HEALTHCARE go up and down completely randomly.

Pair Corralation between ResMed and SHIP HEALTHCARE

Assuming the 90 days horizon ResMed is expected to generate 1.64 times less return on investment than SHIP HEALTHCARE. But when comparing it to its historical volatility, ResMed Inc is 1.25 times less risky than SHIP HEALTHCARE. It trades about 0.02 of its potential returns per unit of risk. SHIP HEALTHCARE HLDGINC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,105  in SHIP HEALTHCARE HLDGINC on October 15, 2024 and sell it today you would earn a total of  195.00  from holding SHIP HEALTHCARE HLDGINC or generate 17.65% return on investment over 90 days.

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

ResMed Inc  vs.  SHIP HEALTHCARE HLDGINC

ResMed Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ResMed is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SHIP HEALTHCARE HLDGINC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIP HEALTHCARE HLDGINC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ResMed and SHIP HEALTHCARE

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

The idea behind ResMed Inc and SHIP HEALTHCARE HLDGINC 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.