Correlation Between Dow 2x and Health Care
Can any of the company-specific risk be diversified away by investing in both Dow 2x 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 Dow 2x and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow 2x Strategy and Health Care Fund, you can compare the effects of market volatilities on Dow 2x 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 Dow 2x with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Health Care.
Diversification Opportunities for Dow 2x and Health Care
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and HEALTH is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x 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 Dow 2x 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 Dow 2x 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 Dow 2x i.e., Dow 2x and Health Care go up and down completely randomly.
Pair Corralation between Dow 2x and Health Care
Assuming the 90 days horizon Dow 2x Strategy is expected to under-perform the Health Care. In addition to that, Dow 2x is 1.69 times more volatile than Health Care Fund. It trades about -0.3 of its total potential returns per unit of risk. Health Care Fund is currently generating about -0.13 per unit of volatility. If you would invest 9,213 in Health Care Fund on December 1, 2024 and sell it today you would lose (179.00) from holding Health Care Fund or give up 1.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow 2x Strategy vs. Health Care Fund
Performance |
| Timeline |
| Dow 2x Strategy |
| Health Care Fund |
Dow 2x and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow 2x and Health Care
The main advantage of trading using opposite Dow 2x and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x 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.| Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Ultramid Cap Profund Ultramid Cap |
| Health Care vs. Transamerica High Yield | Health Care vs. Pioneer High Income | Health Care vs. Mesirow Financial High | Health Care vs. Alpine High Yield |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |