Correlation Between Heren Health and Healthcare

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

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

Diversification Opportunities for Heren Health and Healthcare

0.87

Correlation Coefficient

Heren Health  Healthcare

Very poor diversification

The 3 months correlation between Heren and Healthcare is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Heren Health Co and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare and Heren 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 Heren Health Co are associated (or correlated) with Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of Heren Health i.e., Heren Health and Healthcare go up and down completely randomly.

Pair Corralation between Heren Health and Healthcare

Assuming the 90 days trading horizon Heren Health Co is expected to generate 1.39 times more return on investment than Healthcare. However, Heren Health is 1.39 times more volatile than Healthcare Co. It trades about 0.15 of its potential returns per unit of risk. Healthcare Co is currently generating about 0.14 per unit of risk. If you would invest  1,014  in Heren Health Co on September 5, 2024 and sell it today you would earn a total of  416.00  from holding Heren Health Co or generate 41.03% return on investment over 90 days.

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

Heren Health Co  vs.  Healthcare Co

Heren Health

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heren Health Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heren Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Healthcare

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heren Health and Healthcare

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

The idea behind Heren Health Co and Healthcare Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..