Correlation Between Health Care and Great West
Can any of the company-specific risk be diversified away by investing in both Health Care and Great West 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 Great West 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 Great West Lifetime 2020, you can compare the effects of market volatilities on Health Care and Great West 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 Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Great West.
Diversification Opportunities for Health Care and Great West
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Health and Great is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Great West Lifetime 2020 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifetime 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifetime has no effect on the direction of Health Care i.e., Health Care and Great West go up and down completely randomly.
Pair Corralation between Health Care and Great West
Assuming the 90 days horizon Health Care Ultrasector is expected to generate 2.79 times more return on investment than Great West. However, Health Care is 2.79 times more volatile than Great West Lifetime 2020. It trades about 0.19 of its potential returns per unit of risk. Great West Lifetime 2020 is currently generating about 0.1 per unit of risk. If you would invest 9,939 in Health Care Ultrasector on October 24, 2024 and sell it today you would earn a total of 368.00 from holding Health Care Ultrasector or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Ultrasector vs. Great West Lifetime 2020
Performance |
| Timeline |
| Health Care Ultrasector |
| Great West Lifetime |
Health Care and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Great West
The main advantage of trading using opposite Health Care and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Great West 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 Great West will offset losses from the drop in Great West's long position.| Health Care vs. Franklin Natural Resources | Health Care vs. Alpsalerian Energy Infrastructure | Health Care vs. Transamerica Mlp Energy | Health Care vs. Fidelity Advisor Energy |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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