Correlation Between Health Care and IShares Medical
Can any of the company-specific risk be diversified away by investing in both Health Care and IShares Medical 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 Health Care and IShares Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Select and iShares Medical Devices, you can compare the effects of market volatilities on Health Care and IShares Medical 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 Health Care with a short position of IShares Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and IShares Medical.
Diversification Opportunities for Health Care and IShares Medical
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Health and IShares is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Select and iShares Medical Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Medical Devices and Health Care 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 Health Care Select are associated (or correlated) with IShares Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Medical Devices has no effect on the direction of Health Care i.e., Health Care and IShares Medical go up and down completely randomly.
Pair Corralation between Health Care and IShares Medical
Considering the 90-day investment horizon Health Care Select is expected to under-perform the IShares Medical. In addition to that, Health Care is 1.15 times more volatile than iShares Medical Devices. It trades about -0.09 of its total potential returns per unit of risk. iShares Medical Devices is currently generating about 0.19 per unit of volatility. If you would invest 5,889 in iShares Medical Devices on August 29, 2024 and sell it today you would earn a total of 180.00 from holding iShares Medical Devices or generate 3.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Select vs. iShares Medical Devices
Performance |
| Timeline |
| Health Care Select |
| iShares Medical Devices |
Health Care and IShares Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and IShares Medical
The main advantage of trading using opposite Health Care and IShares Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, IShares Medical 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 IShares Medical will offset losses from the drop in IShares Medical's long position.| Health Care vs. Consumer Staples Select | Health Care vs. Industrial Select Sector | Health Care vs. Consumer Discretionary Select | Health Care vs. Utilities Select Sector |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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