Correlation Between Healthcare Services and Global Healthcare

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Can any of the company-specific risk be diversified away by investing in both Healthcare Services and Global 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 Services and Global Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Healthcare Services Group and Global Healthcare REIT, you can compare the effects of market volatilities on Healthcare Services and Global 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 Services with a short position of Global Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Services and Global Healthcare.

Diversification Opportunities for Healthcare Services and Global Healthcare

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Healthcare and Global is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Services Group and Global Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Healthcare REIT and Healthcare Services 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 Services Group are associated (or correlated) with Global Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Healthcare REIT has no effect on the direction of Healthcare Services i.e., Healthcare Services and Global Healthcare go up and down completely randomly.

Pair Corralation between Healthcare Services and Global Healthcare

Given the investment horizon of 90 days Healthcare Services Group is expected to generate 0.97 times more return on investment than Global Healthcare. However, Healthcare Services Group is 1.03 times less risky than Global Healthcare. It trades about 0.2 of its potential returns per unit of risk. Global Healthcare REIT is currently generating about -0.02 per unit of risk. If you would invest  975.00  in Healthcare Services Group on November 27, 2023 and sell it today you would earn a total of  253.00  from holding Healthcare Services Group or generate 25.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Healthcare Services Group  vs.  Global Healthcare REIT

 Performance 
       Timeline  
Healthcare Services 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Services Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Healthcare Services reported solid returns over the last few months and may actually be approaching a breakup point.
Global Healthcare REIT 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Global Healthcare REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Global Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Healthcare Services and Global Healthcare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Healthcare Services and Global Healthcare

The main advantage of trading using opposite Healthcare Services and Global Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare Services position performs unexpectedly, Global 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 Global Healthcare will offset losses from the drop in Global Healthcare's long position.
The idea behind Healthcare Services Group and Global Healthcare REIT 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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