Correlation Between Healthcare Triangle and DaVita HealthCare

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

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

Diversification Opportunities for Healthcare Triangle and DaVita HealthCare

-0.55

Correlation Coefficient

Healthcare Triangle  DaVita HealthCare

Excellent diversification

The 3 months correlation between Healthcare and DaVita is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Triangle and DaVita HealthCare Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DaVita HealthCare and Healthcare Triangle 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 Triangle are associated (or correlated) with DaVita HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DaVita HealthCare has no effect on the direction of Healthcare Triangle i.e., Healthcare Triangle and DaVita HealthCare go up and down completely randomly.

Pair Corralation between Healthcare Triangle and DaVita HealthCare

Given the investment horizon of 90 days Healthcare Triangle is expected to under-perform the DaVita HealthCare. In addition to that, Healthcare Triangle is 3.22 times more volatile than DaVita HealthCare Partners. It trades about -0.26 of its total potential returns per unit of risk. DaVita HealthCare Partners is currently generating about 0.13 per unit of volatility. If you would invest  12,300  in DaVita HealthCare Partners on February 20, 2024 and sell it today you would earn a total of  1,682  from holding DaVita HealthCare Partners or generate 13.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Healthcare Triangle  vs.  DaVita HealthCare Partners

Healthcare Triangle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Triangle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

DaVita HealthCare

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DaVita HealthCare Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, DaVita HealthCare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Healthcare Triangle and DaVita HealthCare

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

The idea behind Healthcare Triangle and DaVita HealthCare Partners 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..