Correlation Between Global Technology and Health Care
Can any of the company-specific risk be diversified away by investing in both Global Technology 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 Global Technology and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Technology Portfolio and Health Care Ultrasector, you can compare the effects of market volatilities on Global Technology 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 Global Technology with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Technology and Health Care.
Diversification Opportunities for Global Technology and Health Care
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Global and Health is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Portfolio and Health Care Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Ultrasector and Global Technology 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 Global Technology Portfolio 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 Ultrasector has no effect on the direction of Global Technology i.e., Global Technology and Health Care go up and down completely randomly.
Pair Corralation between Global Technology and Health Care
Assuming the 90 days horizon Global Technology Portfolio is expected to generate 1.24 times more return on investment than Health Care. However, Global Technology is 1.24 times more volatile than Health Care Ultrasector. It trades about 0.11 of its potential returns per unit of risk. Health Care Ultrasector is currently generating about 0.01 per unit of risk. If you would invest 1,071 in Global Technology Portfolio on September 5, 2024 and sell it today you would earn a total of 1,088 from holding Global Technology Portfolio or generate 101.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Global Technology Portfolio vs. Health Care Ultrasector
Performance |
| Timeline |
| Global Technology |
| Health Care Ultrasector |
Global Technology and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Technology and Health Care
The main advantage of trading using opposite Global Technology and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Technology 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.| Global Technology vs. The Hartford Small | Global Technology vs. Glg Intl Small | Global Technology vs. Champlain Small | Global Technology vs. Ancorathelen Small Mid Cap |
| 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 |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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