Correlation Between Carefree and Absolute Health

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

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

Diversification Opportunities for Carefree and Absolute Health

0.0

Correlation Coefficient

Carefree  Absolute Health

Pay attention - limited upside

The 3 months correlation between Carefree and Absolute is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Carefree Group and Absolute Health and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Health and Carefree 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 Carefree Group are associated (or correlated) with Absolute Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Health has no effect on the direction of Carefree i.e., Carefree and Absolute Health go up and down completely randomly.

Pair Corralation between Carefree and Absolute Health

Given the investment horizon of 90 days Carefree Group is expected to generate 0.5 times more return on investment than Absolute Health. However, Carefree Group is 1.98 times less risky than Absolute Health. It trades about 0.07 of its potential returns per unit of risk. Absolute Health and is currently generating about 0.03 per unit of risk. If you would invest  2.00  in Carefree Group on September 25, 2024 and sell it today you would lose (0.50) from holding Carefree Group or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Carefree Group  vs.  Absolute Health and

Carefree Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 abnormal 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.

Pair Trading with Carefree and Absolute Health

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

The idea behind Carefree Group and Absolute Health and 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 CEOs Directory module to screen CEOs from public companies around the world.