Correlation Between Tree Island and NeuPath Health

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

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

Diversification Opportunities for Tree Island and NeuPath Health

-0.55

Correlation Coefficient

Tree Island  NeuPath Health

Excellent diversification

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

Pair Corralation between Tree Island and NeuPath Health

Assuming the 90 days trading horizon Tree Island Steel is expected to under-perform the NeuPath Health. But the stock apears to be less risky and, when comparing its historical volatility, Tree Island Steel is 1.97 times less risky than NeuPath Health. The stock trades about 0.0 of its potential returns per unit of risk. The NeuPath Health is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  20.00  in NeuPath Health on April 25, 2025 and sell it today you would earn a total of  5.00  from holding NeuPath Health or generate 25.0% return on investment over 90 days.

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

Tree Island Steel  vs.  NeuPath Health

Tree Island Steel

Risk-Adjusted Performance

Very Weak

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

NeuPath Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NeuPath Health are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, NeuPath Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tree Island and NeuPath Health

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

The idea behind Tree Island Steel and NeuPath Health 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.