Correlation Between WELL Health and Brompton Energy

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

By analyzing existing cross correlation between WELL Health Technologies and Brompton Energy Split, you can compare the effects of market volatilities on WELL Health and Brompton Energy 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 WELL Health with a short position of Brompton Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of WELL Health and Brompton Energy.

Diversification Opportunities for WELL Health and Brompton Energy

0.74

Correlation Coefficient

WELL Health  Brompton Energy

Poor diversification

The 3 months correlation between WELL and Brompton is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding WELL Health Technologies and Brompton Energy Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Energy Split and WELL 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 WELL Health Technologies are associated (or correlated) with Brompton Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Energy Split has no effect on the direction of WELL Health i.e., WELL Health and Brompton Energy go up and down completely randomly.

Pair Corralation between WELL Health and Brompton Energy

Assuming the 90 days trading horizon WELL Health Technologies is expected to generate 0.53 times more return on investment than Brompton Energy. However, WELL Health Technologies is 1.87 times less risky than Brompton Energy. It trades about -0.05 of its potential returns per unit of risk. Brompton Energy Split is currently generating about -0.2 per unit of risk. If you would invest  688.00  in WELL Health Technologies on October 13, 2024 and sell it today you would lose (17.00) from holding WELL Health Technologies or give up 2.47% of portfolio value over 90 days.

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

WELL Health Technologies  vs.  Brompton Energy Split

WELL Health Technologies

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WELL Health Technologies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, WELL Health displayed solid returns over the last few months and may actually be approaching a breakup point.

Brompton Energy Split

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Energy Split are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WELL Health and Brompton Energy

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

The idea behind WELL Health Technologies and Brompton Energy Split 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.