Correlation Between Vanguard Health and Eventide Healthcare
Can any of the company-specific risk be diversified away by investing in both Vanguard Health and Eventide 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 Vanguard Health and Eventide Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Health Care and Eventide Healthcare Life, you can compare the effects of market volatilities on Vanguard Health and Eventide 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 Vanguard Health with a short position of Eventide Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Eventide Healthcare.
Diversification Opportunities for Vanguard Health and Eventide Healthcare
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Eventide is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Eventide Healthcare Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Healthcare Life and Vanguard Health 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 Vanguard Health Care are associated (or correlated) with Eventide Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Healthcare Life has no effect on the direction of Vanguard Health i.e., Vanguard Health and Eventide Healthcare go up and down completely randomly.
Pair Corralation between Vanguard Health and Eventide Healthcare
Assuming the 90 days horizon Vanguard Health Care is expected to under-perform the Eventide Healthcare. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Health Care is 1.95 times less risky than Eventide Healthcare. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Eventide Healthcare Life is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 3,618 in Eventide Healthcare Life on August 29, 2024 and sell it today you would lose (24.00) from holding Eventide Healthcare Life or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Health Care vs. Eventide Healthcare Life
Performance |
| Timeline |
| Vanguard Health Care |
| Eventide Healthcare Life |
Vanguard Health and Eventide Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and Eventide Healthcare
The main advantage of trading using opposite Vanguard Health and Eventide Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health position performs unexpectedly, Eventide 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 Eventide Healthcare will offset losses from the drop in Eventide Healthcare's long position.| Vanguard Health vs. Fidelity Advisor Technology | Vanguard Health vs. Fidelity Advisor Biotechnology | Vanguard Health vs. Fidelity Advisor Financial | Vanguard Health vs. Fidelity Advisor Utilities |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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