Correlation Between Health Care and Vanguard Energy
Can any of the company-specific risk be diversified away by investing in both Health Care and Vanguard Energy 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 Vanguard Energy 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 Vanguard Energy Fund, you can compare the effects of market volatilities on Health Care and Vanguard Energy 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 Vanguard Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Vanguard Energy.
Diversification Opportunities for Health Care and Vanguard Energy
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Health and Vanguard is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Services and Vanguard Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Energy 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 Vanguard Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Energy has no effect on the direction of Health Care i.e., Health Care and Vanguard Energy go up and down completely randomly.
Pair Corralation between Health Care and Vanguard Energy
Assuming the 90 days horizon Health Care Services is expected to generate 0.74 times more return on investment than Vanguard Energy. However, Health Care Services is 1.35 times less risky than Vanguard Energy. It trades about 0.18 of its potential returns per unit of risk. Vanguard Energy Fund is currently generating about 0.0 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 | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Health Care Services vs. Vanguard Energy Fund
Performance |
Timeline |
Health Care Services |
Vanguard Energy |
Health Care and Vanguard Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Health Care and Vanguard Energy
The main advantage of trading using opposite Health Care and Vanguard Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Vanguard Energy 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 Vanguard Energy will offset losses from the drop in Vanguard Energy's long position.Health Care vs. Construction And Housing | Health Care vs. Insurance Portfolio Insurance | Health Care vs. Brokerage And Investment | Health Care vs. Medical Equipment And |
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Check out your portfolio center.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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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