Correlation Between SOVEREIGN TRUST and FIDSON HEALTHCARE

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

By analyzing existing cross correlation between SOVEREIGN TRUST INSURANCE and FIDSON HEALTHCARE PLC, you can compare the effects of market volatilities on SOVEREIGN TRUST and FIDSON 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 SOVEREIGN TRUST with a short position of FIDSON HEALTHCARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOVEREIGN TRUST and FIDSON HEALTHCARE.

Diversification Opportunities for SOVEREIGN TRUST and FIDSON HEALTHCARE

-0.46

Correlation Coefficient

SOVEREIGN TRUST  FIDSON HEALTHCARE

Very good diversification

The 3 months correlation between SOVEREIGN and FIDSON is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding SOVEREIGN TRUST INSURANCE and FIDSON HEALTHCARE PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIDSON HEALTHCARE PLC and SOVEREIGN TRUST 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 SOVEREIGN TRUST INSURANCE are associated (or correlated) with FIDSON HEALTHCARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIDSON HEALTHCARE PLC has no effect on the direction of SOVEREIGN TRUST i.e., SOVEREIGN TRUST and FIDSON HEALTHCARE go up and down completely randomly.

Pair Corralation between SOVEREIGN TRUST and FIDSON HEALTHCARE

Assuming the 90 days trading horizon SOVEREIGN TRUST is expected to generate 2.67 times less return on investment than FIDSON HEALTHCARE. In addition to that, SOVEREIGN TRUST is 1.4 times more volatile than FIDSON HEALTHCARE PLC. It trades about 0.03 of its total potential returns per unit of risk. FIDSON HEALTHCARE PLC is currently generating about 0.1 per unit of volatility. If you would invest  1,300  in FIDSON HEALTHCARE PLC on September 5, 2024 and sell it today you would earn a total of  240.00  from holding FIDSON HEALTHCARE PLC or generate 18.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

SOVEREIGN TRUST INSURANCE  vs.  FIDSON HEALTHCARE PLC

SOVEREIGN TRUST INSURANCE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SOVEREIGN TRUST INSURANCE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, SOVEREIGN TRUST may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FIDSON HEALTHCARE PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIDSON HEALTHCARE PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, FIDSON HEALTHCARE sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOVEREIGN TRUST and FIDSON HEALTHCARE

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

The idea behind SOVEREIGN TRUST INSURANCE and FIDSON HEALTHCARE PLC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.