Correlation Between Absolute Health and Algoma Central

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Can any of the company-specific risk be diversified away by investing in both Absolute Health and Algoma Central 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 Absolute Health and Algoma Central into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Health and and Algoma Central, you can compare the effects of market volatilities on Absolute Health and Algoma Central 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 Absolute Health with a short position of Algoma Central. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Health and Algoma Central.

Diversification Opportunities for Absolute Health and Algoma Central

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Absolute and Algoma is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Health and and Algoma Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Central and Absolute 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 Absolute Health and are associated (or correlated) with Algoma Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Central has no effect on the direction of Absolute Health i.e., Absolute Health and Algoma Central go up and down completely randomly.

Pair Corralation between Absolute Health and Algoma Central

Given the investment horizon of 90 days Absolute Health and is expected to under-perform the Algoma Central. In addition to that, Absolute Health is 12.45 times more volatile than Algoma Central. It trades about -0.12 of its total potential returns per unit of risk. Algoma Central is currently generating about 0.04 per unit of volatility. If you would invest  1,049  in Algoma Central on September 23, 2024 and sell it today you would earn a total of  26.00  from holding Algoma Central or generate 2.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Absolute Health and  vs.  Algoma Central

 Performance 
       Timeline  
Absolute Health 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Absolute Health and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
Algoma Central 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Central are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Algoma Central is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Absolute Health and Algoma Central Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Absolute Health and Algoma Central

The main advantage of trading using opposite Absolute Health and Algoma Central positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Health position performs unexpectedly, Algoma Central 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 Algoma Central will offset losses from the drop in Algoma Central's long position.
The idea behind Absolute Health and and Algoma Central 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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