Correlation Between Health Care and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Health Care and Vanguard Small-cap 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 Vanguard Small-cap 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 Vanguard Small Cap Value, you can compare the effects of market volatilities on Health Care and Vanguard Small-cap 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 Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Vanguard Small-cap.
Diversification Opportunities for Health Care and Vanguard Small-cap
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Health and Vanguard is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap 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 Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Health Care i.e., Health Care and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Health Care and Vanguard Small-cap
Assuming the 90 days horizon Health Care Ultrasector is expected to generate 0.86 times more return on investment than Vanguard Small-cap. However, Health Care Ultrasector is 1.16 times less risky than Vanguard Small-cap. It trades about 0.0 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about -0.08 per unit of risk. If you would invest 10,817 in Health Care Ultrasector on December 24, 2024 and sell it today you would lose (26.00) from holding Health Care Ultrasector or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Ultrasector vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Health Care Ultrasector |
| Vanguard Small Cap |
Health Care and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Vanguard Small-cap
The main advantage of trading using opposite Health Care and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Vanguard Small-cap 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 Vanguard Small-cap will offset losses from the drop in Vanguard Small-cap's long position.| Health Care vs. Doubleline E Fixed | Health Care vs. Calvert International Equity | Health Care vs. Doubleline Core Fixed | Health Care vs. Gmo International Equity |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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