Correlation Between Health Care and Western Asset
Can any of the company-specific risk be diversified away by investing in both Health Care and Western Asset 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 Western Asset 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 Western Asset Municipal, you can compare the effects of market volatilities on Health Care and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Western Asset.
Diversification Opportunities for Health Care and Western Asset
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Health and Western is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Western Asset Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Municipal 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Municipal has no effect on the direction of Health Care i.e., Health Care and Western Asset go up and down completely randomly.
Pair Corralation between Health Care and Western Asset
Assuming the 90 days horizon Health Care Ultrasector is expected to under-perform the Western Asset. In addition to that, Health Care is 5.24 times more volatile than Western Asset Municipal. It trades about -0.26 of its total potential returns per unit of risk. Western Asset Municipal is currently generating about -0.43 per unit of volatility. If you would invest 733.00 in Western Asset Municipal on October 8, 2024 and sell it today you would lose (15.00) from holding Western Asset Municipal or give up 2.05% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Health Care Ultrasector vs. Western Asset Municipal
Performance |
Timeline |
Health Care Ultrasector |
Western Asset Municipal |
Health Care and Western Asset Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Health Care and Western Asset
The main advantage of trading using opposite Health Care and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.Health Care vs. Short Real Estate | Health Care vs. Short Real Estate | Health Care vs. Ultrashort Mid Cap Profund | Health Care vs. Ultrashort Mid Cap Profund |
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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 Stocks Directory module to find actively traded stocks across global markets.
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