Correlation Between IShares Healthcare and Health Care
Can any of the company-specific risk be diversified away by investing in both IShares Healthcare 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 IShares Healthcare and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Healthcare Providers and Health Care Select, you can compare the effects of market volatilities on IShares Healthcare 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 IShares Healthcare with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Healthcare and Health Care.
Diversification Opportunities for IShares Healthcare and Health Care
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Health is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Healthcare Providers and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select and IShares Healthcare 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 iShares Healthcare Providers 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 Select has no effect on the direction of IShares Healthcare i.e., IShares Healthcare and Health Care go up and down completely randomly.
Pair Corralation between IShares Healthcare and Health Care
Considering the 90-day investment horizon iShares Healthcare Providers is expected to generate 1.32 times more return on investment than Health Care. However, IShares Healthcare is 1.32 times more volatile than Health Care Select. It trades about 0.19 of its potential returns per unit of risk. Health Care Select is currently generating about 0.18 per unit of risk. If you would invest 4,992 in iShares Healthcare Providers on November 18, 2024 and sell it today you would earn a total of 225.00 from holding iShares Healthcare Providers or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Healthcare Providers vs. Health Care Select
Performance |
| Timeline |
| iShares Healthcare |
| Health Care Select |
IShares Healthcare and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Healthcare and Health Care
The main advantage of trading using opposite IShares Healthcare and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Healthcare 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.| IShares Healthcare vs. iShares Pharmaceuticals ETF | IShares Healthcare vs. iShares Medical Devices | IShares Healthcare vs. iShares Healthcare ETF | IShares Healthcare vs. iShares Broker Dealers Securities |
| Health Care vs. Consumer Staples Select | Health Care vs. Industrial Select Sector | Health Care vs. Consumer Discretionary Select | Health Care vs. Utilities Select Sector |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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