Correlation Between Atlantic Energy and China Health

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

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

Diversification Opportunities for Atlantic Energy and China Health

-0.41

Correlation Coefficient

Atlantic Energy  China Health

Very good diversification

The 3 months correlation between Atlantic and China is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic Energy Solutions and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management and Atlantic Energy 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 Atlantic Energy Solutions are associated (or correlated) with China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of Atlantic Energy i.e., Atlantic Energy and China Health go up and down completely randomly.

Pair Corralation between Atlantic Energy and China Health

Given the investment horizon of 90 days Atlantic Energy Solutions is expected to generate 2.04 times more return on investment than China Health. However, Atlantic Energy is 2.04 times more volatile than China Health Management. It trades about 0.09 of its potential returns per unit of risk. China Health Management is currently generating about -0.08 per unit of risk. If you would invest  1.60  in Atlantic Energy Solutions on September 3, 2024 and sell it today you would lose (0.02) from holding Atlantic Energy Solutions or give up 1.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Atlantic Energy Solutions  vs.  China Health Management

Atlantic Energy Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantic Energy Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Atlantic Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

China Health Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Atlantic Energy and China Health

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

The idea behind Atlantic Energy Solutions and China Health Management 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.