Correlation Between SAIC and Humanwell Healthcare

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

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

Diversification Opportunities for SAIC and Humanwell Healthcare

0.75

Correlation Coefficient

SAIC  Humanwell Healthcare

Poor diversification

The 3 months correlation between SAIC and Humanwell is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SAIC Motor Corp and Humanwell Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humanwell Healthcare and SAIC 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 SAIC Motor Corp are associated (or correlated) with Humanwell Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humanwell Healthcare has no effect on the direction of SAIC i.e., SAIC and Humanwell Healthcare go up and down completely randomly.

Pair Corralation between SAIC and Humanwell Healthcare

Assuming the 90 days trading horizon SAIC Motor Corp is expected to generate 1.52 times more return on investment than Humanwell Healthcare. However, SAIC is 1.52 times more volatile than Humanwell Healthcare Group. It trades about 0.16 of its potential returns per unit of risk. Humanwell Healthcare Group is currently generating about 0.17 per unit of risk. If you would invest  1,322  in SAIC Motor Corp on September 26, 2024 and sell it today you would earn a total of  540.00  from holding SAIC Motor Corp or generate 40.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

SAIC Motor Corp  vs.  Humanwell Healthcare Group

SAIC Motor Corp

Risk-Adjusted Performance

12 of 100

Good

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

Humanwell Healthcare

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Humanwell Healthcare Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Humanwell Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAIC and Humanwell Healthcare

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

The idea behind SAIC Motor Corp and Humanwell Healthcare Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.