Correlation Between Cloud DX and CareMax

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

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

Diversification Opportunities for Cloud DX and CareMax

-0.48

Correlation Coefficient

Cloud DX  CareMax

Very good diversification

The 3 months correlation between Cloud and CareMax is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cloud DX and CareMax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareMax and Cloud DX 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 Cloud DX are associated (or correlated) with CareMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareMax has no effect on the direction of Cloud DX i.e., Cloud DX and CareMax go up and down completely randomly.

Pair Corralation between Cloud DX and CareMax

Assuming the 90 days horizon Cloud DX is expected to generate 1.52 times more return on investment than CareMax. However, Cloud DX is 1.52 times more volatile than CareMax. It trades about 0.03 of its potential returns per unit of risk. CareMax is currently generating about -0.08 per unit of risk. If you would invest  12.00  in Cloud DX on February 13, 2024 and sell it today you would lose (6.27) from holding Cloud DX or give up 52.25% of portfolio value over 90 days.

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

Cloud DX  vs.  CareMax

Cloud DX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cloud DX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Cloud DX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

CareMax

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CareMax are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CareMax showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cloud DX and CareMax

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

The idea behind Cloud DX and CareMax 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.