Correlation Between Healthcare Global and Styrenix Performance

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

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

Diversification Opportunities for Healthcare Global and Styrenix Performance

0.69

Correlation Coefficient

Healthcare Global  Styrenix Performance

Poor diversification

The 3 months correlation between Healthcare and Styrenix is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Global Enterprises and Styrenix Performance Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Styrenix Performance and Healthcare Global 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 Healthcare Global Enterprises are associated (or correlated) with Styrenix Performance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Styrenix Performance has no effect on the direction of Healthcare Global i.e., Healthcare Global and Styrenix Performance go up and down completely randomly.

Pair Corralation between Healthcare Global and Styrenix Performance

Assuming the 90 days trading horizon Healthcare Global Enterprises is expected to generate 0.89 times more return on investment than Styrenix Performance. However, Healthcare Global Enterprises is 1.12 times less risky than Styrenix Performance. It trades about 0.34 of its potential returns per unit of risk. Styrenix Performance Materials is currently generating about 0.25 per unit of risk. If you would invest  41,280  in Healthcare Global Enterprises on September 22, 2024 and sell it today you would earn a total of  11,850  from holding Healthcare Global Enterprises or generate 28.71% return on investment over 90 days.

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

Healthcare Global Enterprises  vs.  Styrenix Performance Materials

Healthcare Global

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Global Enterprises are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Healthcare Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Styrenix Performance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Styrenix Performance Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Styrenix Performance demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Healthcare Global and Styrenix Performance

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

The idea behind Healthcare Global Enterprises and Styrenix Performance Materials 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.