Correlation Between Retailing Portfolio and Health Care

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

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

Diversification Opportunities for Retailing Portfolio and Health Care

0.42

Correlation Coefficient

Retailing Portfolio  Health Care

Very weak diversification

The 3 months correlation between Retailing and Health is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Retailing Portfolio Retailing and Health Care Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Services and Retailing Portfolio 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 Retailing Portfolio Retailing 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 Services has no effect on the direction of Retailing Portfolio i.e., Retailing Portfolio and Health Care go up and down completely randomly.

Pair Corralation between Retailing Portfolio and Health Care

Assuming the 90 days horizon Retailing Portfolio Retailing is expected to under-perform the Health Care. But the mutual fund apears to be less risky and, when comparing its historical volatility, Retailing Portfolio Retailing is 1.29 times less risky than Health Care. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Health Care Services is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  11,110  in Health Care Services on December 21, 2024 and sell it today you would earn a total of  61.00  from holding Health Care Services or generate 0.55% return on investment over 90 days.

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

Retailing Portfolio Retailing  vs.  Health Care Services

Retailing Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Retailing Portfolio Retailing 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 Services

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Health Care Services are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Health Care is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Retailing Portfolio and Health Care

The main advantage of trading using opposite Retailing Portfolio and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retailing Portfolio 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 Retailing Portfolio Retailing and Health Care Services 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..