Correlation Between Tree House and Global Health

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

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

Diversification Opportunities for Tree House and Global Health

-0.69

Correlation Coefficient

Tree House  Global Health

Excellent diversification

The 3 months correlation between Tree and Global is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tree House Education and Global Health Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health Limited and Tree House 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 Tree House Education are associated (or correlated) with Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health Limited has no effect on the direction of Tree House i.e., Tree House and Global Health go up and down completely randomly.

Pair Corralation between Tree House and Global Health

Assuming the 90 days trading horizon Tree House Education is expected to under-perform the Global Health. In addition to that, Tree House is 1.19 times more volatile than Global Health Limited. It trades about -0.27 of its total potential returns per unit of risk. Global Health Limited is currently generating about 0.09 per unit of volatility. If you would invest  110,765  in Global Health Limited on December 26, 2024 and sell it today you would earn a total of  14,145  from holding Global Health Limited or generate 12.77% return on investment over 90 days.

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

Tree House Education  vs.  Global Health Limited

Tree House Education

Risk-Adjusted Performance

Very Weak

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

Global Health Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Global Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tree House and Global Health

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

The idea behind Tree House Education and Global Health Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.