Correlation Between Health Care and Blackrock Health
Can any of the company-specific risk be diversified away by investing in both Health Care and Blackrock Health 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 Blackrock Health 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 Blackrock Health Sciences, you can compare the effects of market volatilities on Health Care and Blackrock Health 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 Blackrock Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Blackrock Health.
Diversification Opportunities for Health Care and Blackrock Health
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between HEALTH and Blackrock is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Blackrock Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Health Sciences 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 Blackrock Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Health Sciences has no effect on the direction of Health Care i.e., Health Care and Blackrock Health go up and down completely randomly.
Pair Corralation between Health Care and Blackrock Health
Assuming the 90 days horizon Health Care Fund is expected to generate 0.85 times more return on investment than Blackrock Health. However, Health Care Fund is 1.18 times less risky than Blackrock Health. It trades about 0.04 of its potential returns per unit of risk. Blackrock Health Sciences is currently generating about -0.01 per unit of risk. If you would invest 2,964 in Health Care Fund on September 2, 2024 and sell it today you would earn a total of 90.00 from holding Health Care Fund or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Fund vs. Blackrock Health Sciences
Performance |
| Timeline |
| Health Care Fund |
| Blackrock Health Sciences |
Health Care and Blackrock Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Blackrock Health
The main advantage of trading using opposite Health Care and Blackrock Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Blackrock Health 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 Blackrock Health will offset losses from the drop in Blackrock Health'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 |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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