Correlation Between CDSPI Global and Global Healthcare

Can any of the company-specific risk be diversified away by investing in both CDSPI Global and Global 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 CDSPI Global and Global Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CDSPI Global Growth and Global Healthcare Income, you can compare the effects of market volatilities on CDSPI Global and Global 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 CDSPI Global with a short position of Global Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDSPI Global and Global Healthcare.

Diversification Opportunities for CDSPI Global and Global Healthcare

-0.62

Correlation Coefficient

CDSPI Global  Global Healthcare

Excellent diversification

The 3 months correlation between CDSPI and Global is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding CDSPI Global Growth and Global Healthcare Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Healthcare Income and CDSPI Global 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 CDSPI Global Growth are associated (or correlated) with Global Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Healthcare Income has no effect on the direction of CDSPI Global i.e., CDSPI Global and Global Healthcare go up and down completely randomly.

Pair Corralation between CDSPI Global and Global Healthcare

Assuming the 90 days trading horizon CDSPI Global Growth is expected to generate 1.16 times more return on investment than Global Healthcare. However, CDSPI Global is 1.16 times more volatile than Global Healthcare Income. It trades about 0.02 of its potential returns per unit of risk. Global Healthcare Income is currently generating about -0.17 per unit of risk. If you would invest  6,053  in CDSPI Global Growth on October 11, 2024 and sell it today you would earn a total of  11.00  from holding CDSPI Global Growth or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

CDSPI Global Growth  vs.  Global Healthcare Income

CDSPI Global Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CDSPI Global Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, CDSPI Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Global Healthcare Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Healthcare Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with CDSPI Global and Global Healthcare

The main advantage of trading using opposite CDSPI Global and Global Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDSPI Global position performs unexpectedly, Global 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 Global Healthcare will offset losses from the drop in Global Healthcare's long position.

The idea behind CDSPI Global Growth and Global Healthcare Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.