Correlation Between Sparx Technology and WELL Health

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

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

Diversification Opportunities for Sparx Technology and WELL Health

-0.59

Correlation Coefficient

Sparx Technology  WELL Health

Excellent diversification

The 3 months correlation between Sparx and WELL is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sparx Technology and WELL Health Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELL Health Technologies and Sparx Technology 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 Sparx Technology are associated (or correlated) with WELL Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELL Health Technologies has no effect on the direction of Sparx Technology i.e., Sparx Technology and WELL Health go up and down completely randomly.

Pair Corralation between Sparx Technology and WELL Health

Assuming the 90 days trading horizon Sparx Technology is expected to generate 166.76 times more return on investment than WELL Health. However, Sparx Technology is 166.76 times more volatile than WELL Health Technologies. It trades about 0.21 of its potential returns per unit of risk. WELL Health Technologies is currently generating about -0.05 per unit of risk. If you would invest  0.50  in Sparx Technology on February 2, 2024 and sell it today you would earn a total of  2,262  from holding Sparx Technology or generate 452500.0% return on investment over 90 days.

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

Sparx Technology  vs.  WELL Health Technologies

Sparx Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sparx Technology showed solid returns over the last few months and may actually be approaching a breakup point.

WELL Health Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WELL Health Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, WELL Health is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sparx Technology and WELL Health

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

The idea behind Sparx Technology and WELL Health Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.