Correlation Between Software And and Health Care

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

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

Diversification Opportunities for Software And and Health Care

0.9

Correlation Coefficient

Software And  Health Care

Almost no diversification

The 3 months correlation between Software and Health is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Software And It and Health Care Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Portfolio and Software And 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 Software And It 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 Portfolio has no effect on the direction of Software And i.e., Software And and Health Care go up and down completely randomly.

Pair Corralation between Software And and Health Care

Assuming the 90 days horizon Software And It is expected to under-perform the Health Care. In addition to that, Software And is 1.28 times more volatile than Health Care Portfolio. It trades about -0.14 of its total potential returns per unit of risk. Health Care Portfolio is currently generating about -0.16 per unit of volatility. If you would invest  3,151  in Health Care Portfolio on December 1, 2024 and sell it today you would lose (358.00) from holding Health Care Portfolio or give up 11.36% of portfolio value over 90 days.

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

Software And It  vs.  Health Care Portfolio

Software And It

Risk-Adjusted Performance

Very Weak

Over the last 90 days Software And It 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Health Care Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Health Care Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical 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 Software And and Health Care

The main advantage of trading using opposite Software And and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software And 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 Software And It and Health Care Portfolio 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.