Correlation Between Worldwide Healthcare and AcadeMedia

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

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

Diversification Opportunities for Worldwide Healthcare and AcadeMedia

0.76

Correlation Coefficient

Worldwide Healthcare  AcadeMedia

Poor diversification

The 3 months correlation between Worldwide and AcadeMedia is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Worldwide Healthcare Trust and AcadeMedia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AcadeMedia AB and Worldwide Healthcare 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 Worldwide Healthcare Trust are associated (or correlated) with AcadeMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AcadeMedia AB has no effect on the direction of Worldwide Healthcare i.e., Worldwide Healthcare and AcadeMedia go up and down completely randomly.

Pair Corralation between Worldwide Healthcare and AcadeMedia

Assuming the 90 days trading horizon Worldwide Healthcare Trust is expected to under-perform the AcadeMedia. But the stock apears to be less risky and, when comparing its historical volatility, Worldwide Healthcare Trust is 1.43 times less risky than AcadeMedia. The stock trades about -0.16 of its potential returns per unit of risk. The AcadeMedia AB is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  6,514  in AcadeMedia AB on September 2, 2024 and sell it today you would lose (514.00) from holding AcadeMedia AB or give up 7.89% of portfolio value over 90 days.

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

Worldwide Healthcare Trust  vs.  AcadeMedia AB

Worldwide Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worldwide Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

AcadeMedia AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AcadeMedia AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Worldwide Healthcare and AcadeMedia

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

The idea behind Worldwide Healthcare Trust and AcadeMedia AB 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 Stocks Directory module to find actively traded stocks across global markets.