Correlation Between Health Care and Value Fund
Can any of the company-specific risk be diversified away by investing in both Health Care and Value Fund 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 Value Fund 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 Value Fund A, you can compare the effects of market volatilities on Health Care and Value Fund 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 Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Value Fund.
Diversification Opportunities for Health Care and Value Fund
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Health and Value is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Value Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund A 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund A has no effect on the direction of Health Care i.e., Health Care and Value Fund go up and down completely randomly.
Pair Corralation between Health Care and Value Fund
Assuming the 90 days horizon Health Care is expected to generate 7.04 times less return on investment than Value Fund. In addition to that, Health Care is 1.33 times more volatile than Value Fund A. It trades about 0.04 of its total potential returns per unit of risk. Value Fund A is currently generating about 0.35 per unit of volatility. If you would invest 849.00 in Value Fund A on September 2, 2024 and sell it today you would earn a total of 41.00 from holding Value Fund A or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Fund vs. Value Fund A
Performance |
| Timeline |
| Health Care Fund |
| Value Fund A |
Health Care and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Value Fund
The main advantage of trading using opposite Health Care and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund's long position.| Health Care vs. Siit Emerging Markets | Health Care vs. Artisan Emerging Markets | Health Care vs. Ashmore Emerging Markets | Health Care vs. Transamerica Emerging Markets |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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