Correlation Between Bellatora and Absolute Health

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

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

Diversification Opportunities for Bellatora and Absolute Health

-0.08

Correlation Coefficient

Bellatora  Absolute Health

Good diversification

The 3 months correlation between Bellatora and Absolute is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bellatora and Absolute Health and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Health and Bellatora 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 Bellatora 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 Bellatora i.e., Bellatora and Absolute Health go up and down completely randomly.

Pair Corralation between Bellatora and Absolute Health

Given the investment horizon of 90 days Bellatora is expected to generate 2.39 times more return on investment than Absolute Health. However, Bellatora is 2.39 times more volatile than Absolute Health and. It trades about 0.12 of its potential returns per unit of risk. Absolute Health and is currently generating about -0.12 per unit of risk. If you would invest  64.00  in Bellatora on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Bellatora or generate 0.0% return on investment over 90 days.

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

Bellatora  vs.  Absolute Health and

Bellatora

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bellatora are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Bellatora reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Bellatora and Absolute Health

The main advantage of trading using opposite Bellatora and Absolute Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bellatora 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 Bellatora 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.