Correlation Between Prudential Health and Tekla Healthcare
Can any of the company-specific risk be diversified away by investing in both Prudential Health and Tekla Healthcare 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 Prudential Health and Tekla Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Health Sciences and Tekla Healthcare Opportunities, you can compare the effects of market volatilities on Prudential Health and Tekla Healthcare 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 Prudential Health with a short position of Tekla Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and Tekla Healthcare.
Diversification Opportunities for Prudential Health and Tekla Healthcare
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Tekla is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp and Prudential Health 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 Prudential Health Sciences are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Opp has no effect on the direction of Prudential Health i.e., Prudential Health and Tekla Healthcare go up and down completely randomly.
Pair Corralation between Prudential Health and Tekla Healthcare
Assuming the 90 days horizon Prudential Health Sciences is expected to generate 0.82 times more return on investment than Tekla Healthcare. However, Prudential Health Sciences is 1.22 times less risky than Tekla Healthcare. It trades about -0.13 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about -0.11 per unit of risk. If you would invest 4,158 in Prudential Health Sciences on August 28, 2024 and sell it today you would lose (135.00) from holding Prudential Health Sciences or give up 3.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Prudential Health Sciences vs. Tekla Healthcare Opportunities
Performance |
| Timeline |
| Prudential Health |
| Tekla Healthcare Opp |
Prudential Health and Tekla Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Health and Tekla Healthcare
The main advantage of trading using opposite Prudential Health and Tekla Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Health position performs unexpectedly, Tekla Healthcare 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 Tekla Healthcare will offset losses from the drop in Tekla Healthcare's long position.| Prudential Health vs. Legg Mason Partners | Prudential Health vs. Pnc Emerging Markets | Prudential Health vs. T Rowe Price | Prudential Health vs. Ep Emerging Markets |
| Tekla Healthcare vs. Tekla Healthcare Investors | Tekla Healthcare vs. Tekla Life Sciences | Tekla Healthcare vs. Cohen Steers Reit | Tekla Healthcare vs. XAI Octagon Floating |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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