Correlation Between Delaware Healthcare and Health Care

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

By analyzing existing cross correlation between Delaware Healthcare Fund and Health Care Ultrasector, you can compare the effects of market volatilities on Delaware Healthcare and Health Care 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 Delaware Healthcare with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delaware Healthcare and Health Care.

Diversification Opportunities for Delaware Healthcare and Health Care

0.9

Correlation Coefficient

Delaware Healthcare  Health Care

Almost no diversification

The 3 months correlation between Delaware and Health is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Delaware Healthcare Fund and Health Care Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Ultrasector and Delaware Healthcare 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 Delaware Healthcare Fund are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Ultrasector has no effect on the direction of Delaware Healthcare i.e., Delaware Healthcare and Health Care go up and down completely randomly.

Pair Corralation between Delaware Healthcare and Health Care

Assuming the 90 days horizon Delaware Healthcare Fund is expected to under-perform the Health Care. In addition to that, Delaware Healthcare is 1.54 times more volatile than Health Care Ultrasector. It trades about -0.16 of its total potential returns per unit of risk. Health Care Ultrasector is currently generating about -0.1 per unit of volatility. If you would invest  11,123  in Health Care Ultrasector on October 24, 2024 and sell it today you would lose (816.00) from holding Health Care Ultrasector or give up 7.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Delaware Healthcare Fund  vs.  Health Care Ultrasector

Delaware Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delaware Healthcare Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Health Care Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Delaware Healthcare and Health Care

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

The idea behind Delaware Healthcare Fund and Health Care Ultrasector 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.