Correlation Between Ecofibre and Global Health

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

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

Diversification Opportunities for Ecofibre and Global Health

0.12

Correlation Coefficient

Ecofibre  Global Health

Average diversification

The 3 months correlation between Ecofibre and Global is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health and Ecofibre 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 Ecofibre 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 has no effect on the direction of Ecofibre i.e., Ecofibre and Global Health go up and down completely randomly.

Pair Corralation between Ecofibre and Global Health

Assuming the 90 days trading horizon Ecofibre is expected to generate 3.34 times less return on investment than Global Health. In addition to that, Ecofibre is 2.27 times more volatile than Global Health. It trades about 0.0 of its total potential returns per unit of risk. Global Health is currently generating about 0.01 per unit of volatility. If you would invest  14.00  in Global Health on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Global Health or generate 0.0% return on investment over 90 days.

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

Ecofibre  vs.  Global Health

Ecofibre

Risk-Adjusted Performance

0 of 100

Weak

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

Global Health

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Global Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ecofibre and Global Health

The main advantage of trading using opposite Ecofibre and Global Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecofibre 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 Ecofibre and Global Health 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.