Correlation Between Blue Coast and Global Health

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

By analyzing existing cross correlation between Blue Coast Hotels and Global Health Limited, you can compare the effects of market volatilities on Blue Coast and Global 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 Blue Coast with a short position of Global Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Coast and Global Health.

Diversification Opportunities for Blue Coast and Global Health

-0.66

Correlation Coefficient

Blue Coast  Global Health

Excellent diversification

The 3 months correlation between Blue and Global is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Blue Coast Hotels and Global Health Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health Limited and Blue Coast 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 Blue Coast Hotels are associated (or correlated) with Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health Limited has no effect on the direction of Blue Coast i.e., Blue Coast and Global Health go up and down completely randomly.

Pair Corralation between Blue Coast and Global Health

Assuming the 90 days trading horizon Blue Coast Hotels is expected to generate 0.79 times more return on investment than Global Health. However, Blue Coast Hotels is 1.26 times less risky than Global Health. It trades about 0.12 of its potential returns per unit of risk. Global Health Limited is currently generating about 0.0 per unit of risk. If you would invest  871.00  in Blue Coast Hotels on September 4, 2024 and sell it today you would earn a total of  97.00  from holding Blue Coast Hotels or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Blue Coast Hotels  vs.  Global Health Limited

Blue Coast Hotels

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Coast Hotels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Blue Coast may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global Health Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Health Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Global Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blue Coast and Global Health

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

The idea behind Blue Coast Hotels and Global Health Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.