Correlation Between Absolute Health and Digital World

Can any of the company-specific risk be diversified away by investing in both Absolute Health and Digital World 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 Digital World 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 Digital World Acquisition, you can compare the effects of market volatilities on Absolute Health and Digital World 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 Digital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Health and Digital World.

Diversification Opportunities for Absolute Health and Digital World

-0.52

Correlation Coefficient

Absolute Health  Digital World

Excellent diversification

The 3 months correlation between Absolute and Digital is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Health and and Digital World Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital World Acquisition 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 Digital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital World Acquisition has no effect on the direction of Absolute Health i.e., Absolute Health and Digital World go up and down completely randomly.

Pair Corralation between Absolute Health and Digital World

If you would invest  1,976  in Digital World Acquisition on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Digital World Acquisition or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.54%
Values	Daily Returns

Absolute Health and  vs.  Digital World Acquisition

Absolute Health

Risk-Adjusted Performance

0 of 100

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 weak 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.

Digital World Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital World Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Digital World is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Absolute Health and Digital World

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

The idea behind Absolute Health and and Digital World Acquisition 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.