Correlation Between Defense And and Health Care
Can any of the company-specific risk be diversified away by investing in both Defense And 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 Defense And and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Defense And Aerospace and Health Care Services, you can compare the effects of market volatilities on Defense And 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 Defense And with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defense And and Health Care.
Diversification Opportunities for Defense And and Health Care
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Defense and Health is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Defense And Aerospace and Health Care Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Services and Defense And 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 Defense And Aerospace 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 Services has no effect on the direction of Defense And i.e., Defense And and Health Care go up and down completely randomly.
Pair Corralation between Defense And and Health Care
Assuming the 90 days horizon Defense And is expected to generate 1.1 times less return on investment than Health Care. In addition to that, Defense And is 1.04 times more volatile than Health Care Services. It trades about 0.13 of its total potential returns per unit of risk. Health Care Services is currently generating about 0.15 per unit of volatility. If you would invest 12,186 in Health Care Services on August 31, 2024 and sell it today you would earn a total of 514.00 from holding Health Care Services or generate 4.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Defense And Aerospace vs. Health Care Services
Performance |
| Timeline |
| Defense And Aerospace |
| Health Care Services |
Defense And and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Defense And and Health Care
The main advantage of trading using opposite Defense And and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defense And 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.| Defense And vs. Chemicals Portfolio Chemicals | Defense And vs. Construction And Housing | Defense And vs. Retailing Portfolio Retailing | Defense And vs. Health Care Services |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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