Correlation Between Conservative Allocation and Tekla Healthcare

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

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

Diversification Opportunities for Conservative Allocation and Tekla Healthcare

0.57

Correlation Coefficient

Conservative Allocation  Tekla Healthcare

Very weak diversification

The 3 months correlation between Conservative and Tekla is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Conservative Allocation Fund 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 Conservative Allocation 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 Conservative Allocation Fund 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 Conservative Allocation i.e., Conservative Allocation and Tekla Healthcare go up and down completely randomly.

Pair Corralation between Conservative Allocation and Tekla Healthcare

Assuming the 90 days horizon Conservative Allocation Fund is expected to generate 0.68 times more return on investment than Tekla Healthcare. However, Conservative Allocation Fund is 1.47 times less risky than Tekla Healthcare. It trades about -0.32 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about -0.26 per unit of risk. If you would invest  1,160  in Conservative Allocation Fund on October 9, 2024 and sell it today you would lose (59.00) from holding Conservative Allocation Fund or give up 5.09% of portfolio value over 90 days.

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

Conservative Allocation Fund  vs.  Tekla Healthcare Opportunities

Conservative Allocation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conservative Allocation Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Conservative Allocation 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 inconsistent performance in the last few months, the Fund's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the fund retail investors.

Pair Trading with Conservative Allocation and Tekla Healthcare

The main advantage of trading using opposite Conservative Allocation and Tekla Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Conservative Allocation 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 Conservative Allocation Fund 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.