Correlation Between Sebata Holdings and Life Healthcare

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

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

Diversification Opportunities for Sebata Holdings and Life Healthcare

-0.65

Correlation Coefficient

Sebata Holdings  Life Healthcare

Excellent diversification

The 3 months correlation between Sebata and Life is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sebata Holdings and Life Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Healthcare and Sebata Holdings 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 Sebata Holdings are associated (or correlated) with Life Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Healthcare has no effect on the direction of Sebata Holdings i.e., Sebata Holdings and Life Healthcare go up and down completely randomly.

Pair Corralation between Sebata Holdings and Life Healthcare

Assuming the 90 days trading horizon Sebata Holdings is expected to under-perform the Life Healthcare. In addition to that, Sebata Holdings is 2.51 times more volatile than Life Healthcare. It trades about -0.06 of its total potential returns per unit of risk. Life Healthcare is currently generating about 0.06 per unit of volatility. If you would invest  168,700  in Life Healthcare on September 5, 2024 and sell it today you would earn a total of  6,800  from holding Life Healthcare or generate 4.03% return on investment over 90 days.

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

Sebata Holdings  vs.  Life Healthcare

Sebata Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sebata Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Life Healthcare

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Life Healthcare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Life Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sebata Holdings and Life Healthcare

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

The idea behind Sebata Holdings and Life Healthcare 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.