Correlation Between EROAD and Global Health

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

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

Diversification Opportunities for EROAD and Global Health

-0.15

Correlation Coefficient

EROAD  Global Health

Good diversification

The 3 months correlation between EROAD and Global is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health and EROAD 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 EROAD 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 EROAD i.e., EROAD and Global Health go up and down completely randomly.

Pair Corralation between EROAD and Global Health

Assuming the 90 days trading horizon EROAD is expected to under-perform the Global Health. But the stock apears to be less risky and, when comparing its historical volatility, EROAD is 1.02 times less risky than Global Health. The stock trades about -0.09 of its potential returns per unit of risk. The Global Health is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Global Health on September 22, 2024 and sell it today you would earn a total of  1.00  from holding Global Health or generate 7.69% return on investment over 90 days.

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

EROAD  vs.  Global Health

EROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Global Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Global Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EROAD and Global Health

The main advantage of trading using opposite EROAD and Global Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EROAD 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 EROAD 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.