Correlation Between Equity Growth and Health Care
Can any of the company-specific risk be diversified away by investing in both Equity Growth 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 Equity Growth and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Strategy and Health Care Fund, you can compare the effects of market volatilities on Equity Growth 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 Equity Growth with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Health Care.
Diversification Opportunities for Equity Growth and Health Care
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Equity and Health is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Strategy and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund and Equity Growth 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 Equity Growth Strategy 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 Fund has no effect on the direction of Equity Growth i.e., Equity Growth and Health Care go up and down completely randomly.
Pair Corralation between Equity Growth and Health Care
Assuming the 90 days horizon Equity Growth is expected to generate 9230.72 times less return on investment than Health Care. But when comparing it to its historical volatility, Equity Growth Strategy is 106.53 times less risky than Health Care. It trades about 0.0 of its potential returns per unit of risk. Health Care Fund is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,700 in Health Care Fund on November 27, 2024 and sell it today you would earn a total of 7,231 from holding Health Care Fund or generate 195.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Strategy vs. Health Care Fund
Performance |
| Timeline |
| Equity Growth Strategy |
| Health Care Fund |
Equity Growth and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Health Care
The main advantage of trading using opposite Equity Growth and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth 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.| Equity Growth vs. Nt International Small Mid | Equity Growth vs. Small Pany Growth | Equity Growth vs. Ab Small Cap | Equity Growth vs. Artisan Small Cap |
| Health Care vs. Doubleline Global Bond | Health Care vs. T Rowe Price | Health Care vs. Investec Global Franchise | Health Care vs. Qs Global Equity |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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