Correlation Between Active Health and Profitable Develop

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

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

Diversification Opportunities for Active Health and Profitable Develop

0.2

Correlation Coefficient

Active Health  Profitable Develop

Modest diversification

The 3 months correlation between Active and Profitable is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Active Health Foods and Profitable Develop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profitable Develop and Active 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 Active Health Foods are associated (or correlated) with Profitable Develop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profitable Develop has no effect on the direction of Active Health i.e., Active Health and Profitable Develop go up and down completely randomly.

Pair Corralation between Active Health and Profitable Develop

Given the investment horizon of 90 days Active Health Foods is expected to under-perform the Profitable Develop. But the pink sheet apears to be less risky and, when comparing its historical volatility, Active Health Foods is 2.95 times less risky than Profitable Develop. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Profitable Develop is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Profitable Develop on September 16, 2024 and sell it today you would lose (0.01) from holding Profitable Develop or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Active Health Foods  vs.  Profitable Develop

Active Health Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Active Health Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental 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.

Profitable Develop

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Profitable Develop are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, Profitable Develop disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Active Health and Profitable Develop

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

The idea behind Active Health Foods and Profitable Develop 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.