Correlation Between Health Care and Consumer Services
Can any of the company-specific risk be diversified away by investing in both Health Care and Consumer Services 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 Consumer Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Ultrasector and Consumer Services Ultrasector, you can compare the effects of market volatilities on Health Care and Consumer Services 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 Consumer Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Consumer Services.
Diversification Opportunities for Health Care and Consumer Services
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Health and Consumer is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Consumer Services Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Services 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 Ultrasector are associated (or correlated) with Consumer Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Services has no effect on the direction of Health Care i.e., Health Care and Consumer Services go up and down completely randomly.
Pair Corralation between Health Care and Consumer Services
Assuming the 90 days horizon Health Care Ultrasector is expected to generate 0.64 times more return on investment than Consumer Services. However, Health Care Ultrasector is 1.56 times less risky than Consumer Services. It trades about 0.06 of its potential returns per unit of risk. Consumer Services Ultrasector is currently generating about -0.35 per unit of risk. If you would invest 10,829 in Health Care Ultrasector on December 1, 2024 and sell it today you would earn a total of 139.00 from holding Health Care Ultrasector or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Ultrasector vs. Consumer Services Ultrasector
Performance |
| Timeline |
| Health Care Ultrasector |
| Consumer Services |
Health Care and Consumer Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Consumer Services
The main advantage of trading using opposite Health Care and Consumer Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Consumer Services 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 Consumer Services will offset losses from the drop in Consumer Services' long position.| Health Care vs. Blackrock Financial Institutions | Health Care vs. Icon Financial Fund | Health Care vs. Financial Services Portfolio | Health Care vs. Financial Industries Fund |
| Consumer Services vs. World Energy Fund | Consumer Services vs. Oil Gas Ultrasector | Consumer Services vs. Short Oil Gas | Consumer Services vs. Vanguard Energy Index |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| CEOs Directory Screen CEOs from public companies around the world |