Correlation Between AVIC Fund and Healthcare

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

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

Diversification Opportunities for AVIC Fund and Healthcare

0.62

Correlation Coefficient

AVIC Fund  Healthcare

Poor diversification

The 3 months correlation between AVIC and Healthcare is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding AVIC Fund Management and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare and AVIC Fund 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 AVIC Fund Management 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 AVIC Fund i.e., AVIC Fund and Healthcare go up and down completely randomly.

Pair Corralation between AVIC Fund and Healthcare

Assuming the 90 days trading horizon AVIC Fund Management is expected to generate 0.18 times more return on investment than Healthcare. However, AVIC Fund Management is 5.66 times less risky than Healthcare. It trades about 0.45 of its potential returns per unit of risk. Healthcare Co is currently generating about -0.01 per unit of risk. If you would invest  1,004  in AVIC Fund Management on September 28, 2024 and sell it today you would earn a total of  49.00  from holding AVIC Fund Management or generate 4.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

AVIC Fund Management  vs.  Healthcare Co

AVIC Fund Management

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC Fund Management are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVIC Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AVIC Fund and Healthcare

The main advantage of trading using opposite AVIC Fund and Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVIC Fund 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 AVIC Fund Management 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 Transaction History module to view history of all your transactions and understand their impact on performance.