Correlation Between Therapeutic Solutions and Wesana Health

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

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

Diversification Opportunities for Therapeutic Solutions and Wesana Health

0.21

Correlation Coefficient

Therapeutic Solutions  Wesana Health

Modest diversification

The 3 months correlation between Therapeutic and Wesana is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Therapeutic Solutions Internat and Wesana Health Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesana Health Holdings and Therapeutic Solutions 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 Therapeutic Solutions International are associated (or correlated) with Wesana Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesana Health Holdings has no effect on the direction of Therapeutic Solutions i.e., Therapeutic Solutions and Wesana Health go up and down completely randomly.

Pair Corralation between Therapeutic Solutions and Wesana Health

Given the investment horizon of 90 days Therapeutic Solutions is expected to generate 60.63 times less return on investment than Wesana Health. But when comparing it to its historical volatility, Therapeutic Solutions International is 3.39 times less risky than Wesana Health. It trades about 0.01 of its potential returns per unit of risk. Wesana Health Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.88  in Wesana Health Holdings on September 4, 2024 and sell it today you would lose (1.91) from holding Wesana Health Holdings or give up 66.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Therapeutic Solutions Internat  vs.  Wesana Health Holdings

Therapeutic Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Therapeutic Solutions International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Therapeutic Solutions is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Wesana Health Holdings

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wesana Health Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Wesana Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Therapeutic Solutions and Wesana Health

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

The idea behind Therapeutic Solutions International and Wesana Health Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.