Correlation Between Health Care and Retailing Fund
Can any of the company-specific risk be diversified away by investing in both Health Care and Retailing 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 Retailing 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 Retailing Fund Investor, you can compare the effects of market volatilities on Health Care and Retailing 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 Retailing Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Retailing Fund.
Diversification Opportunities for Health Care and Retailing Fund
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Health and Retailing is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Retailing Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retailing Fund Investor 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 Retailing Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retailing Fund Investor has no effect on the direction of Health Care i.e., Health Care and Retailing Fund go up and down completely randomly.
Pair Corralation between Health Care and Retailing Fund
Assuming the 90 days horizon Health Care is expected to generate 2.76 times less return on investment than Retailing Fund. But when comparing it to its historical volatility, Health Care Fund is 1.38 times less risky than Retailing Fund. It trades about 0.03 of its potential returns per unit of risk. Retailing Fund Investor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,144 in Retailing Fund Investor on August 30, 2024 and sell it today you would earn a total of 1,396 from holding Retailing Fund Investor or generate 33.69% 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. Retailing Fund Investor
Performance |
| Timeline |
| Health Care Fund |
| Retailing Fund Investor |
Health Care and Retailing Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Retailing Fund
The main advantage of trading using opposite Health Care and Retailing Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Retailing 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 Retailing Fund will offset losses from the drop in Retailing Fund's long position.| Health Care vs. Technology Fund Investor | Health Care vs. Financial Services Fund | Health Care vs. Transportation Fund Investor | Health Care vs. Banking Fund Investor |
| Retailing Fund vs. Leisure Fund Investor | Retailing Fund vs. Banking Fund Investor | Retailing Fund vs. Technology Fund Investor | Retailing Fund vs. Financial Services 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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