Correlation Between Small Cap and Tekla Healthcare
Can any of the company-specific risk be diversified away by investing in both Small Cap and Tekla Healthcare 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 Small Cap and Tekla Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and Tekla Healthcare Opportunities, you can compare the effects of market volatilities on Small Cap and Tekla Healthcare 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 Small Cap with a short position of Tekla Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Tekla Healthcare.
Diversification Opportunities for Small Cap and Tekla Healthcare
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Tekla is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp and Small Cap 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 Small Cap Core are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Opp has no effect on the direction of Small Cap i.e., Small Cap and Tekla Healthcare go up and down completely randomly.
Pair Corralation between Small Cap and Tekla Healthcare
Assuming the 90 days horizon Small Cap Core is expected to generate 1.34 times more return on investment than Tekla Healthcare. However, Small Cap is 1.34 times more volatile than Tekla Healthcare Opportunities. It trades about 0.06 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about 0.05 per unit of risk. If you would invest 1,086 in Small Cap Core on August 24, 2024 and sell it today you would earn a total of 350.00 from holding Small Cap Core or generate 32.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Tekla Healthcare Opportunities
Performance |
| Timeline |
| Small Cap Core |
| Tekla Healthcare Opp |
Small Cap and Tekla Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Tekla Healthcare
The main advantage of trading using opposite Small Cap and Tekla Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Tekla Healthcare 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 Tekla Healthcare will offset losses from the drop in Tekla Healthcare's long position.| Small Cap vs. Ab Government Exchange | Small Cap vs. Us Government Securities | Small Cap vs. John Hancock Government | Small Cap vs. Virtus Seix Government |
| Tekla Healthcare vs. MFS Investment Grade | Tekla Healthcare vs. Eaton Vance National | Tekla Healthcare vs. Blackrock Muniyield Quality | Tekla Healthcare vs. Munivest 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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