Correlation Between Dynamic Global and Global Healthcare

Can any of the company-specific risk be diversified away by investing in both Dynamic 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 Dynamic 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 Dynamic Global Fixed and Global Healthcare Income, you can compare the effects of market volatilities on Dynamic 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 Dynamic Global with a short position of Global Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Global and Global Healthcare.

Diversification Opportunities for Dynamic Global and Global Healthcare

0.71

Correlation Coefficient

Dynamic Global  Global Healthcare

Poor diversification

The 3 months correlation between Dynamic and Global is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Global Fixed 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 Dynamic 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 Dynamic Global Fixed 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 Dynamic Global i.e., Dynamic Global and Global Healthcare go up and down completely randomly.

Pair Corralation between Dynamic Global and Global Healthcare

Assuming the 90 days trading horizon Dynamic Global is expected to generate 6.28 times less return on investment than Global Healthcare. But when comparing it to its historical volatility, Dynamic Global Fixed is 6.6 times less risky than Global Healthcare. It trades about 0.18 of its potential returns per unit of risk. Global Healthcare Income is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  757.00  in Global Healthcare Income on December 22, 2024 and sell it today you would earn a total of  55.00  from holding Global Healthcare Income or generate 7.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.08%
Values	Daily Returns

Dynamic Global Fixed  vs.  Global Healthcare Income

Dynamic Global Fixed

Risk-Adjusted Performance

Good

Over the last 90 days Dynamic Global Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, Dynamic Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Global Healthcare Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Healthcare Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak technical and fundamental indicators, Global Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dynamic Global and Global Healthcare

The main advantage of trading using opposite Dynamic Global and Global Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic 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 Dynamic Global Fixed 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.