Correlation Between American Funds and Tekla Healthcare

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

By analyzing existing cross correlation between American Funds The and Tekla Healthcare Opportunities, you can compare the effects of market volatilities on American Funds and Tekla 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 American Funds with a short position of Tekla Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Tekla Healthcare.

Diversification Opportunities for American Funds and Tekla Healthcare

0.29

Correlation Coefficient

American Funds  Tekla Healthcare

Modest diversification

The 3 months correlation between American and Tekla is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp and American Funds 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 American Funds The are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Opp has no effect on the direction of American Funds i.e., American Funds and Tekla Healthcare go up and down completely randomly.

Pair Corralation between American Funds and Tekla Healthcare

Assuming the 90 days horizon American Funds is expected to generate 2.75 times less return on investment than Tekla Healthcare. In addition to that, American Funds is 1.1 times more volatile than Tekla Healthcare Opportunities. It trades about 0.17 of its total potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about 0.52 per unit of volatility. If you would invest  1,825  in Tekla Healthcare Opportunities on October 20, 2024 and sell it today you would earn a total of  170.00  from holding Tekla Healthcare Opportunities or generate 9.32% return on investment over 90 days.

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

American Funds The  vs.  Tekla Healthcare Opportunities

American Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds The has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tekla Healthcare Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Even with latest inconsistent performance, the Fund's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the fund retail investors.

Pair Trading with American Funds and Tekla Healthcare

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

The idea behind American Funds The and Tekla Healthcare Opportunities 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.