Correlation Between Health Care and Deutsche Capital
Can any of the company-specific risk be diversified away by investing in both Health Care and Deutsche Capital 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 Deutsche Capital 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 Deutsche Capital Growth, you can compare the effects of market volatilities on Health Care and Deutsche Capital 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 Deutsche Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Deutsche Capital.
Diversification Opportunities for Health Care and Deutsche Capital
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HEALTH and Deutsche is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Deutsche Capital Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Capital Growth 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 Deutsche Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Capital Growth has no effect on the direction of Health Care i.e., Health Care and Deutsche Capital go up and down completely randomly.
Pair Corralation between Health Care and Deutsche Capital
Assuming the 90 days horizon Health Care is expected to generate 9.37 times less return on investment than Deutsche Capital. But when comparing it to its historical volatility, Health Care Fund is 1.35 times less risky than Deutsche Capital. It trades about 0.01 of its potential returns per unit of risk. Deutsche Capital Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 11,497 in Deutsche Capital Growth on September 1, 2024 and sell it today you would earn a total of 2,105 from holding Deutsche Capital Growth or generate 18.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Health Care Fund vs. Deutsche Capital Growth
Performance |
| Timeline |
| Health Care Fund |
| Deutsche Capital Growth |
Health Care and Deutsche Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Deutsche Capital
The main advantage of trading using opposite Health Care and Deutsche Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Deutsche Capital 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 Deutsche Capital will offset losses from the drop in Deutsche Capital'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 |
| Deutsche Capital vs. Eventide Healthcare Life | Deutsche Capital vs. Deutsche Health And | Deutsche Capital vs. Alphacentric Lifesci Healthcare | Deutsche Capital vs. Health Care Fund |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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