Correlation Between Health Care and Health Care
Can any of the company-specific risk be diversified away by investing in both Health Care 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 Health Care and Health Care 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 Health Care Ultrasector, you can compare the effects of market volatilities on Health Care 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 Health Care with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Health Care.
Diversification Opportunities for Health Care and Health Care
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between HEALTH and Health is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Health Care Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Ultrasector 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 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 Ultrasector has no effect on the direction of Health Care i.e., Health Care and Health Care go up and down completely randomly.
Pair Corralation between Health Care and Health Care
Assuming the 90 days horizon Health Care is expected to generate 1.13 times less return on investment than Health Care. But when comparing it to its historical volatility, Health Care Fund is 1.44 times less risky than Health Care. It trades about 0.27 of its potential returns per unit of risk. Health Care Ultrasector is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 9,999 in Health Care Ultrasector on October 25, 2024 and sell it today you would earn a total of 476.00 from holding Health Care Ultrasector or generate 4.76% 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. Health Care Ultrasector
Performance |
| Timeline |
| Health Care Fund |
| Health Care Ultrasector |
Health Care and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Health Care
The main advantage of trading using opposite Health Care and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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.| Health Care vs. T Rowe Price | Health Care vs. Transamerica High Yield | Health Care vs. Federated High Yield | Health Care vs. Buffalo High Yield |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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