Correlation Between Trellus Health and First

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

By analyzing existing cross correlation between Trellus Health plc and First Class Metals, you can compare the effects of market volatilities on Trellus Health and First 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 Trellus Health with a short position of First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trellus Health and First.

Diversification Opportunities for Trellus Health and First

-0.38

Correlation Coefficient

Trellus Health  First

Very good diversification

The 3 months correlation between Trellus and First is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Trellus Health plc and First Class Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Class Metals and Trellus 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 Trellus Health plc are associated (or correlated) with First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Class Metals has no effect on the direction of Trellus Health i.e., Trellus Health and First go up and down completely randomly.

Pair Corralation between Trellus Health and First

Assuming the 90 days trading horizon Trellus Health plc is expected to generate 20.97 times more return on investment than First. However, Trellus Health is 20.97 times more volatile than First Class Metals. It trades about 0.11 of its potential returns per unit of risk. First Class Metals is currently generating about 0.01 per unit of risk. If you would invest  68.00  in Trellus Health plc on October 26, 2024 and sell it today you would earn a total of  152.00  from holding Trellus Health plc or generate 223.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Trellus Health plc  vs.  First Class Metals

Trellus Health plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trellus Health plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Trellus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Trellus Health and First

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

The idea behind Trellus Health plc and First Class Metals 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.