Correlation Between Emergent Health and Amazonas Florestal

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

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

Diversification Opportunities for Emergent Health and Amazonas Florestal

0.14

Correlation Coefficient

Emergent Health  Amazonas Florestal

Average diversification

The 3 months correlation between Emergent and Amazonas is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Health Corp and Amazonas Florestal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazonas Florestal and Emergent 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 Emergent Health Corp are associated (or correlated) with Amazonas Florestal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazonas Florestal has no effect on the direction of Emergent Health i.e., Emergent Health and Amazonas Florestal go up and down completely randomly.

Pair Corralation between Emergent Health and Amazonas Florestal

Given the investment horizon of 90 days Emergent Health Corp is expected to under-perform the Amazonas Florestal. But the pink sheet apears to be less risky and, when comparing its historical volatility, Emergent Health Corp is 26.17 times less risky than Amazonas Florestal. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Amazonas Florestal is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Amazonas Florestal on September 20, 2024 and sell it today you would lose (0.01) from holding Amazonas Florestal or give up 100.0% of portfolio value over 90 days.

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

Emergent Health Corp  vs.  Amazonas Florestal

Emergent Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emergent Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Amazonas Florestal

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazonas Florestal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Amazonas Florestal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emergent Health and Amazonas Florestal

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

The idea behind Emergent Health Corp and Amazonas Florestal 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.