Correlation Between Tekla Healthcare and Prudential Health
Can any of the company-specific risk be diversified away by investing in both Tekla Healthcare and Prudential Health 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 Prudential Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tekla Healthcare Investors and Prudential Health Sciences, you can compare the effects of market volatilities on Tekla Healthcare and Prudential Health 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 Prudential Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tekla Healthcare and Prudential Health.
Diversification Opportunities for Tekla Healthcare and Prudential Health
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tekla and Prudential is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Investors and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health 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 Investors are associated (or correlated) with Prudential Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Health has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Prudential Health go up and down completely randomly.
Pair Corralation between Tekla Healthcare and Prudential Health
Assuming the 90 days horizon Tekla Healthcare Investors is expected to generate 0.53 times more return on investment than Prudential Health. However, Tekla Healthcare Investors is 1.9 times less risky than Prudential Health. It trades about -0.15 of its potential returns per unit of risk. Prudential Health Sciences is currently generating about -0.17 per unit of risk. If you would invest 2,044 in Tekla Healthcare Investors on October 22, 2024 and sell it today you would lose (191.00) from holding Tekla Healthcare Investors or give up 9.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tekla Healthcare Investors vs. Prudential Health Sciences
Performance |
| Timeline |
| Tekla Healthcare Inv |
| Prudential Health |
Tekla Healthcare and Prudential Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tekla Healthcare and Prudential Health
The main advantage of trading using opposite Tekla Healthcare and Prudential Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tekla Healthcare position performs unexpectedly, Prudential Health 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 Prudential Health will offset losses from the drop in Prudential Health's long position.| Tekla Healthcare vs. Tiaa Cref Lifestyle Conservative | Tekla Healthcare vs. Stone Ridge Diversified | Tekla Healthcare vs. Madison Diversified Income | Tekla Healthcare vs. Calvert Conservative Allocation |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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