Correlation Between M3 and Healixa

Can any of the company-specific risk be diversified away by investing in both M3 and Healixa 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 M3 and Healixa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between M3 Inc and Healixa, you can compare the effects of market volatilities on M3 and Healixa 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 M3 with a short position of Healixa. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 and Healixa.

Diversification Opportunities for M3 and Healixa

-0.61

Correlation Coefficient

M3  Healixa

Excellent diversification

The 3 months correlation between M3 and Healixa is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding M3 Inc and Healixa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healixa and M3 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 M3 Inc are associated (or correlated) with Healixa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healixa has no effect on the direction of M3 i.e., M3 and Healixa go up and down completely randomly.

Pair Corralation between M3 and Healixa

Assuming the 90 days horizon M3 is expected to generate 3.09 times less return on investment than Healixa. But when comparing it to its historical volatility, M3 Inc is 6.34 times less risky than Healixa. It trades about 0.06 of its potential returns per unit of risk. Healixa is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Healixa on September 18, 2024 and sell it today you would lose (1.69) from holding Healixa or give up 21.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

M3 Inc  vs.  Healixa

M3 Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, M3 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Healixa

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Healixa are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Healixa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M3 and Healixa

The main advantage of trading using opposite M3 and Healixa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 position performs unexpectedly, Healixa 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 Healixa will offset losses from the drop in Healixa's long position.

The idea behind M3 Inc and Healixa 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.