Correlation Between Technology Fund and Health Care
Can any of the company-specific risk be diversified away by investing in both Technology Fund 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 Technology Fund and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Fund Investor and Health Care Fund, you can compare the effects of market volatilities on Technology Fund 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 Technology Fund with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Fund and Health Care.
Diversification Opportunities for Technology Fund and Health Care
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Technology and Health is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Technology Fund Investor and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund and Technology Fund 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 Technology Fund Investor 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 Fund has no effect on the direction of Technology Fund i.e., Technology Fund and Health Care go up and down completely randomly.
Pair Corralation between Technology Fund and Health Care
Assuming the 90 days horizon Technology Fund Investor is expected to generate 1.75 times more return on investment than Health Care. However, Technology Fund is 1.75 times more volatile than Health Care Fund. It trades about 0.08 of its potential returns per unit of risk. Health Care Fund is currently generating about 0.04 per unit of risk. If you would invest 13,558 in Technology Fund Investor on November 2, 2024 and sell it today you would earn a total of 7,796 from holding Technology Fund Investor or generate 57.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Fund Investor vs. Health Care Fund
Performance |
| Timeline |
| Technology Fund Investor |
| Health Care Fund |
Technology Fund and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Fund and Health Care
The main advantage of trading using opposite Technology Fund and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Fund 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.| Technology Fund vs. Health Care Fund | Technology Fund vs. Electronics Fund Investor | Technology Fund vs. Telecommunications Fund Investor | Technology Fund vs. Financial Services Fund |
| Health Care vs. Vanguard Information Technology | Health Care vs. Vanguard Sumer Staples | Health Care vs. Vanguard Sumer Discretionary | Health Care vs. Vanguard Financials Index |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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