Correlation Between Health Care and Chemicals Portfolio
Can any of the company-specific risk be diversified away by investing in both Health Care and Chemicals Portfolio 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 Health Care and Chemicals Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Services and Chemicals Portfolio Chemicals, you can compare the effects of market volatilities on Health Care and Chemicals Portfolio 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 Health Care with a short position of Chemicals Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Chemicals Portfolio.
Diversification Opportunities for Health Care and Chemicals Portfolio
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Health and Chemicals is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Services and Chemicals Portfolio Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemicals Portfolio and Health Care 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 Health Care Services are associated (or correlated) with Chemicals Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemicals Portfolio has no effect on the direction of Health Care i.e., Health Care and Chemicals Portfolio go up and down completely randomly.
Pair Corralation between Health Care and Chemicals Portfolio
Assuming the 90 days horizon Health Care Services is expected to generate 1.28 times more return on investment than Chemicals Portfolio. However, Health Care is 1.28 times more volatile than Chemicals Portfolio Chemicals. It trades about 0.48 of its potential returns per unit of risk. Chemicals Portfolio Chemicals is currently generating about 0.35 per unit of risk. If you would invest 9,928 in Health Care Services on November 3, 2024 and sell it today you would earn a total of 1,179 from holding Health Care Services or generate 11.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Services vs. Chemicals Portfolio Chemicals
Performance |
| Timeline |
| Health Care Services |
| Chemicals Portfolio |
Health Care and Chemicals Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Chemicals Portfolio
The main advantage of trading using opposite Health Care and Chemicals Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Chemicals Portfolio 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 Chemicals Portfolio will offset losses from the drop in Chemicals Portfolio's long position.| Health Care vs. Construction And Housing | Health Care vs. Insurance Portfolio Insurance | Health Care vs. Brokerage And Investment | Health Care vs. Medical Equipment And |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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