Correlation Between Health Care and Fidelity Select

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

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

Diversification Opportunities for Health Care and Fidelity Select

0.17

Correlation Coefficient

Health Care  Fidelity Select

Average diversification

The 3 months correlation between Health and Fidelity is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Services and Fidelity Select Portfolios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Select Port and Health Care 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 Health Care Services are associated (or correlated) with Fidelity Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Select Port has no effect on the direction of Health Care i.e., Health Care and Fidelity Select go up and down completely randomly.

Pair Corralation between Health Care and Fidelity Select

Assuming the 90 days horizon Health Care Services is expected to generate 0.85 times more return on investment than Fidelity Select. However, Health Care Services is 1.18 times less risky than Fidelity Select. It trades about 0.18 of its potential returns per unit of risk. Fidelity Select Portfolios is currently generating about 0.1 per unit of risk. If you would invest  10,000  in Health Care Services on December 27, 2024 and sell it today you would earn a total of  1,251  from holding Health Care Services or generate 12.51% return on investment over 90 days.

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

Health Care Services  vs.  Fidelity Select Portfolios

Health Care Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Health Care Services are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Health Care showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Select Port

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Select Portfolios are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Select may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Health Care and Fidelity Select

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

The idea behind Health Care Services and Fidelity Select Portfolios 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.