Correlation Between Health Care and Blue Chip
Can any of the company-specific risk be diversified away by investing in both Health Care and Blue Chip 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 Blue Chip 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 Blue Chip Fund, you can compare the effects of market volatilities on Health Care and Blue Chip 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 Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Blue Chip.
Diversification Opportunities for Health Care and Blue Chip
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HEALTH and Blue is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Blue Chip Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Fund 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 Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Fund has no effect on the direction of Health Care i.e., Health Care and Blue Chip go up and down completely randomly.
Pair Corralation between Health Care and Blue Chip
Assuming the 90 days horizon Health Care is expected to generate 5.3 times less return on investment than Blue Chip. But when comparing it to its historical volatility, Health Care Fund is 1.16 times less risky than Blue Chip. It trades about 0.04 of its potential returns per unit of risk. Blue Chip Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 4,493 in Blue Chip Fund on August 31, 2024 and sell it today you would earn a total of 200.00 from holding Blue Chip Fund or generate 4.45% 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. Blue Chip Fund
Performance |
| Timeline |
| Health Care Fund |
| Blue Chip Fund |
Health Care and Blue Chip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Blue Chip
The main advantage of trading using opposite Health Care and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Blue Chip 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 Blue Chip will offset losses from the drop in Blue Chip's long position.| Health Care vs. Vy T Rowe | Health Care vs. Eaton Vance Atlanta | Health Care vs. Blackrock Health Sciences | Health Care vs. Blackrock Health Sciences |
| Blue Chip vs. Prudential Health Sciences | Blue Chip vs. The Gabelli Healthcare | Blue Chip vs. Health Care Fund | Blue Chip vs. Fidelity Advisor Health |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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