Correlation Between Health Care and Alphacentric Hedged
Can any of the company-specific risk be diversified away by investing in both Health Care and Alphacentric Hedged 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 Health Care and Alphacentric Hedged into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Fund and Alphacentric Hedged Market, you can compare the effects of market volatilities on Health Care and Alphacentric Hedged 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 Health Care with a short position of Alphacentric Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Alphacentric Hedged.
Diversification Opportunities for Health Care and Alphacentric Hedged
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Health and Alphacentric is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Alphacentric Hedged Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphacentric Hedged and Health Care 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 Health Care Fund are associated (or correlated) with Alphacentric Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphacentric Hedged has no effect on the direction of Health Care i.e., Health Care and Alphacentric Hedged go up and down completely randomly.
Pair Corralation between Health Care and Alphacentric Hedged
Assuming the 90 days horizon Health Care is expected to generate 1.46 times less return on investment than Alphacentric Hedged. But when comparing it to its historical volatility, Health Care Fund is 1.01 times less risky than Alphacentric Hedged. It trades about 0.04 of its potential returns per unit of risk. Alphacentric Hedged Market is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,598 in Alphacentric Hedged Market on September 1, 2024 and sell it today you would earn a total of 138.00 from holding Alphacentric Hedged Market or generate 5.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Fund vs. Alphacentric Hedged Market
Performance |
| Timeline |
| Health Care Fund |
| Alphacentric Hedged |
Health Care and Alphacentric Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Alphacentric Hedged
The main advantage of trading using opposite Health Care and Alphacentric Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Alphacentric Hedged 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 Alphacentric Hedged will offset losses from the drop in Alphacentric Hedged's long position.| Health Care vs. Banking Fund Class | Health Care vs. Basic Materials Fund | Health Care vs. Biotechnology Fund Class | Health Care vs. Government Long Bond |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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