Correlation Between Solventum Corp and Healixa

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

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

Diversification Opportunities for Solventum Corp and Healixa

-0.18

Correlation Coefficient

Solventum Corp  Healixa

Good diversification

The 3 months correlation between Solventum and Healixa is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Solventum Corp and Healixa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healixa and Solventum Corp 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 Solventum Corp 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 Solventum Corp i.e., Solventum Corp and Healixa go up and down completely randomly.

Pair Corralation between Solventum Corp and Healixa

Given the investment horizon of 90 days Solventum Corp is expected to under-perform the Healixa. But the stock apears to be less risky and, when comparing its historical volatility, Solventum Corp is 8.2 times less risky than Healixa. The stock trades about -0.04 of its potential returns per unit of risk. The 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	Insignificant
Accuracy	98.44%
Values	Daily Returns

Solventum Corp  vs.  Healixa

Solventum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solventum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Solventum Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 Solventum Corp and Healixa

The main advantage of trading using opposite Solventum Corp and Healixa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solventum Corp 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 Solventum Corp 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.