Correlation Between Health Care and Artisan Small

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

By analyzing existing cross correlation between Health Care Ultrasector and Artisan Small Cap, you can compare the effects of market volatilities on Health Care and Artisan Small 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 Artisan Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Artisan Small.

Diversification Opportunities for Health Care and Artisan Small

0.12

Correlation Coefficient

Health Care  Artisan Small

Average diversification

The 3 months correlation between Health and Artisan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Artisan Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Small Cap 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 Ultrasector are associated (or correlated) with Artisan Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Small Cap has no effect on the direction of Health Care i.e., Health Care and Artisan Small go up and down completely randomly.

Pair Corralation between Health Care and Artisan Small

Assuming the 90 days horizon Health Care is expected to generate 41.92 times less return on investment than Artisan Small. But when comparing it to its historical volatility, Health Care Ultrasector is 1.29 times less risky than Artisan Small. It trades about 0.0 of its potential returns per unit of risk. Artisan Small Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,982  in Artisan Small Cap on October 9, 2024 and sell it today you would earn a total of  692.00  from holding Artisan Small Cap or generate 23.21% return on investment over 90 days.

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

Health Care Ultrasector  vs.  Artisan Small Cap

Health Care Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Ultrasector 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 forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Artisan Small Cap

Risk-Adjusted Performance

1 of 100

Very Weak

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

Pair Trading with Health Care and Artisan Small

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

The idea behind Health Care Ultrasector and Artisan Small Cap 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.