Correlation Between Health Care and JPMorgan Healthcare
Can any of the company-specific risk be diversified away by investing in both Health Care and JPMorgan 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 Health Care and JPMorgan Healthcare 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 JPMorgan Healthcare Leaders, you can compare the effects of market volatilities on Health Care and JPMorgan 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 Health Care with a short position of JPMorgan Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and JPMorgan Healthcare.
Diversification Opportunities for Health Care and JPMorgan Healthcare
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Health and JPMorgan is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Select and JPMorgan Healthcare Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Healthcare 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 JPMorgan Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Healthcare has no effect on the direction of Health Care i.e., Health Care and JPMorgan Healthcare go up and down completely randomly.
Pair Corralation between Health Care and JPMorgan Healthcare
Considering the 90-day investment horizon Health Care Select is expected to generate 0.92 times more return on investment than JPMorgan Healthcare. However, Health Care Select is 1.09 times less risky than JPMorgan Healthcare. It trades about 0.07 of its potential returns per unit of risk. JPMorgan Healthcare Leaders is currently generating about 0.06 per unit of risk. If you would invest 12,766 in Health Care Select on August 25, 2024 and sell it today you would earn a total of 1,650 from holding Health Care Select or generate 12.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Select vs. JPMorgan Healthcare Leaders
Performance |
| Timeline |
| Health Care Select |
| JPMorgan Healthcare |
Health Care and JPMorgan Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and JPMorgan Healthcare
The main advantage of trading using opposite Health Care and JPMorgan Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, JPMorgan 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 JPMorgan Healthcare will offset losses from the drop in JPMorgan Healthcare'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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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