Correlation Between Financials Ultrasector and Health Care
Can any of the company-specific risk be diversified away by investing in both Financials Ultrasector and Health Care 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 Financials Ultrasector and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financials Ultrasector Profund and Health Care Fund, you can compare the effects of market volatilities on Financials Ultrasector and Health Care 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 Financials Ultrasector with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financials Ultrasector and Health Care.
Diversification Opportunities for Financials Ultrasector and Health Care
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financials and Health is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Financials Ultrasector Profund and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund and Financials Ultrasector 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 Financials Ultrasector Profund are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of Financials Ultrasector i.e., Financials Ultrasector and Health Care go up and down completely randomly.
Pair Corralation between Financials Ultrasector and Health Care
Assuming the 90 days horizon Financials Ultrasector Profund is expected to generate 1.83 times more return on investment than Health Care. However, Financials Ultrasector is 1.83 times more volatile than Health Care Fund. It trades about 0.33 of its potential returns per unit of risk. Health Care Fund is currently generating about 0.26 per unit of risk. If you would invest 4,151 in Financials Ultrasector Profund on November 8, 2024 and sell it today you would earn a total of 420.00 from holding Financials Ultrasector Profund or generate 10.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financials Ultrasector Profund vs. Health Care Fund
Performance |
| Timeline |
| Financials Ultrasector |
| Health Care Fund |
Financials Ultrasector and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financials Ultrasector and Health Care
The main advantage of trading using opposite Financials Ultrasector and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financials Ultrasector position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.| Financials Ultrasector vs. Vy Goldman Sachs | Financials Ultrasector vs. International Investors Gold | Financials Ultrasector vs. Great West Goldman Sachs | Financials Ultrasector vs. World Precious Minerals |
| Health Care vs. College Retirement Equities | Health Care vs. Calvert Moderate Allocation | Health Care vs. Retirement Living Through | Health Care vs. Dimensional Retirement Income |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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