Correlation Between Health Care and Technology Select
Can any of the company-specific risk be diversified away by investing in both Health Care and Technology Select 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 Technology Select 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 Technology Select Sector, you can compare the effects of market volatilities on Health Care and Technology Select 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Technology Select.
Diversification Opportunities for Health Care and Technology Select
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Health and Technology is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Select and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of Health Care i.e., Health Care and Technology Select go up and down completely randomly.
Pair Corralation between Health Care and Technology Select
Considering the 90-day investment horizon Health Care Select is expected to under-perform the Technology Select. But the etf apears to be less risky and, when comparing its historical volatility, Health Care Select is 1.69 times less risky than Technology Select. The etf trades about -0.26 of its potential returns per unit of risk. The Technology Select Sector is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 23,175 in Technology Select Sector on August 23, 2024 and sell it today you would earn a total of 173.00 from holding Technology Select Sector or generate 0.75% 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. Technology Select Sector
Performance |
| Timeline |
| Health Care Select |
| Technology Select Sector |
Health Care and Technology Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Technology Select
The main advantage of trading using opposite Health Care and Technology Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Technology Select 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 Technology Select will offset losses from the drop in Technology Select'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 |
| Technology Select vs. First Trust Technology | Technology Select vs. Fidelity MSCI Information | Technology Select vs. First Trust Nasdaq | Technology Select vs. iShares Expanded Tech Software |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |