Correlation Between DTF Tax and Tekla Healthcare

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

Diversification Opportunities for DTF Tax and Tekla Healthcare

DTFTeklaDiversified AwayDTFTeklaDiversified Away100%
0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between DTF and Tekla is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding DTF Tax Free and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp and DTF Tax 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 DTF Tax Free are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Opp has no effect on the direction of DTF Tax i.e., DTF Tax and Tekla Healthcare go up and down completely randomly.

Pair Corralation between DTF Tax and Tekla Healthcare

Considering the 90-day investment horizon DTF Tax is expected to generate 3.85 times less return on investment than Tekla Healthcare. But when comparing it to its historical volatility, DTF Tax Free is 2.42 times less risky than Tekla Healthcare. It trades about 0.04 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,996  in Tekla Healthcare Opportunities on November 26, 2024 and sell it today you would earn a total of  80.00  from holding Tekla Healthcare Opportunities or generate 4.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.33%
ValuesDaily Returns

DTF Tax Free  vs.  Tekla Healthcare Opportunities

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.15DTF THQ
       Timeline  
DTF Tax Free 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in DTF Tax Free are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DTF Tax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb10.810.91111.111.211.311.4
Tekla Healthcare Opp 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Tekla Healthcare Opportunities are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable technical indicators, Tekla Healthcare is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb18.51919.52020.52121.5

DTF Tax and Tekla Healthcare Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.35-0.99-0.63-0.270.005840.290.651.011.371.73 0.51.01.52.0
JavaScript chart by amCharts 3.21.15DTF THQ
       Returns  

Pair Trading with DTF Tax and Tekla Healthcare

The main advantage of trading using opposite DTF Tax and Tekla Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTF Tax position performs unexpectedly, Tekla 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 Tekla Healthcare will offset losses from the drop in Tekla Healthcare's long position.
The idea behind DTF Tax Free and Tekla Healthcare Opportunities 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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