Correlation Between Health Care and Vanguard Consumer
Can any of the company-specific risk be diversified away by investing in both Health Care and Vanguard Consumer 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 Vanguard Consumer 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 Vanguard Consumer Staples, you can compare the effects of market volatilities on Health Care and Vanguard Consumer 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 Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Vanguard Consumer.
Diversification Opportunities for Health Care and Vanguard Consumer
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Health and Vanguard is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Select and Vanguard Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer Staples 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 Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer Staples has no effect on the direction of Health Care i.e., Health Care and Vanguard Consumer go up and down completely randomly.
Pair Corralation between Health Care and Vanguard Consumer
Considering the 90-day investment horizon Health Care is expected to generate 1.7 times less return on investment than Vanguard Consumer. In addition to that, Health Care is 1.06 times more volatile than Vanguard Consumer Staples. It trades about 0.04 of its total potential returns per unit of risk. Vanguard Consumer Staples is currently generating about 0.07 per unit of volatility. If you would invest 19,107 in Vanguard Consumer Staples on September 12, 2024 and sell it today you would earn a total of 3,145 from holding Vanguard Consumer Staples or generate 16.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Select vs. Vanguard Consumer Staples
Performance |
| Timeline |
| Health Care Select |
| Vanguard Consumer Staples |
Health Care and Vanguard Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Vanguard Consumer
The main advantage of trading using opposite Health Care and Vanguard Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Vanguard Consumer 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 Vanguard Consumer will offset losses from the drop in Vanguard Consumer'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 |
| Vanguard Consumer vs. Invesco SP 500 | Vanguard Consumer vs. Invesco SP 500 | Vanguard Consumer vs. Aquagold International | Vanguard Consumer vs. Morningstar Unconstrained Allocation |
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 Stocks Directory module to find actively traded stocks across global markets.
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