Correlation Between Union Bank and Global Health

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

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

Diversification Opportunities for Union Bank and Global Health

0.78

Correlation Coefficient

Union Bank  Global Health

Poor diversification

The 3 months correlation between Union and Global is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of 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 Union Bank 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 Union Bank of 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 Union Bank i.e., Union Bank and Global Health go up and down completely randomly.

Pair Corralation between Union Bank and Global Health

Assuming the 90 days trading horizon Union Bank of is expected to under-perform the Global Health. In addition to that, Union Bank is 1.11 times more volatile than Global Health Limited. It trades about -0.02 of its total potential returns per unit of risk. Global Health Limited is currently generating about 0.01 per unit of volatility. If you would invest  106,125  in Global Health Limited on October 14, 2024 and sell it today you would earn a total of  1,135  from holding Global Health Limited or generate 1.07% return on investment over 90 days.

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

Union Bank of  vs.  Global Health Limited

Union Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Global Health Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Union Bank and Global Health

The main advantage of trading using opposite Union Bank and Global Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Bank 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 Union Bank of 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.