Correlation Between Transportation Portfolio and Health Care
Can any of the company-specific risk be diversified away by investing in both Transportation Portfolio 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 Transportation Portfolio and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transportation Portfolio Transportation and Health Care Services, you can compare the effects of market volatilities on Transportation Portfolio 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 Transportation Portfolio with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportation Portfolio and Health Care.
Diversification Opportunities for Transportation Portfolio and Health Care
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Transportation and Health is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Transportation Portfolio Trans 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 Transportation Portfolio 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 Transportation Portfolio Transportation 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 Transportation Portfolio i.e., Transportation Portfolio and Health Care go up and down completely randomly.
Pair Corralation between Transportation Portfolio and Health Care
Assuming the 90 days horizon Transportation Portfolio Transportation is expected to generate 0.54 times more return on investment than Health Care. However, Transportation Portfolio Transportation is 1.85 times less risky than Health Care. It trades about -0.04 of its potential returns per unit of risk. Health Care Services is currently generating about -0.11 per unit of risk. If you would invest 11,009 in Transportation Portfolio Transportation on October 23, 2024 and sell it today you would lose (113.00) from holding Transportation Portfolio Transportation or give up 1.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transportation Portfolio Trans vs. Health Care Services
Performance |
| Timeline |
| Transportation Portfolio |
| Health Care Services |
Transportation Portfolio and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transportation Portfolio and Health Care
The main advantage of trading using opposite Transportation Portfolio and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportation Portfolio 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.The idea behind Transportation Portfolio Transportation and Health Care Services 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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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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