Correlation Between Tekla Healthcare and Largecap Value

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Can any of the company-specific risk be diversified away by investing in both Tekla Healthcare and Largecap Value 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 Tekla Healthcare and Largecap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tekla Healthcare Opportunities and Largecap Value Fund, you can compare the effects of market volatilities on Tekla Healthcare and Largecap Value 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 Tekla Healthcare with a short position of Largecap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tekla Healthcare and Largecap Value.

Diversification Opportunities for Tekla Healthcare and Largecap Value

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Tekla and Largecap is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Opportunities and Largecap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Largecap Value and Tekla Healthcare 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 Tekla Healthcare Opportunities are associated (or correlated) with Largecap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Largecap Value has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Largecap Value go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Largecap Value

Considering the 90-day investment horizon Tekla Healthcare is expected to generate 1.36 times less return on investment than Largecap Value. In addition to that, Tekla Healthcare is 1.25 times more volatile than Largecap Value Fund. It trades about 0.04 of its total potential returns per unit of risk. Largecap Value Fund is currently generating about 0.07 per unit of volatility. If you would invest  1,619  in Largecap Value Fund on September 12, 2024 and sell it today you would earn a total of  475.00  from holding Largecap Value Fund or generate 29.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Tekla Healthcare Opportunities  vs.  Largecap Value Fund

 Performance 
       Timeline  
Tekla Healthcare Opp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Tekla Healthcare Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical indicators, Tekla Healthcare is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
Largecap Value 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Largecap Value Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Largecap Value is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Tekla Healthcare and Largecap Value Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tekla Healthcare and Largecap Value

The main advantage of trading using opposite Tekla Healthcare and Largecap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tekla Healthcare position performs unexpectedly, Largecap Value 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 Largecap Value will offset losses from the drop in Largecap Value's long position.
The idea behind Tekla Healthcare Opportunities and Largecap Value Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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