Correlation Between Health Care and Blackrock Lifepath

Can any of the company-specific risk be diversified away by investing in both Health Care and Blackrock Lifepath 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 Blackrock Lifepath 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 Blackrock Lifepath Idx, you can compare the effects of market volatilities on Health Care and Blackrock Lifepath 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 Blackrock Lifepath. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Blackrock Lifepath.

Diversification Opportunities for Health Care and Blackrock Lifepath

0.01

Correlation Coefficient

Health Care  Blackrock Lifepath

Significant diversification

The 3 months correlation between Health and Blackrock is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Blackrock Lifepath Idx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Lifepath Idx 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 Blackrock Lifepath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Lifepath Idx has no effect on the direction of Health Care i.e., Health Care and Blackrock Lifepath go up and down completely randomly.

Pair Corralation between Health Care and Blackrock Lifepath

Assuming the 90 days horizon Health Care Ultrasector is expected to under-perform the Blackrock Lifepath. In addition to that, Health Care is 1.67 times more volatile than Blackrock Lifepath Idx. It trades about -0.21 of its total potential returns per unit of risk. Blackrock Lifepath Idx is currently generating about -0.02 per unit of volatility. If you would invest  2,440  in Blackrock Lifepath Idx on October 11, 2024 and sell it today you would lose (20.00) from holding Blackrock Lifepath Idx or give up 0.82% of portfolio value over 90 days.

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

Health Care Ultrasector  vs.  Blackrock Lifepath Idx

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.

Blackrock Lifepath Idx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Lifepath Idx has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Blackrock Lifepath 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 Blackrock Lifepath

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

The idea behind Health Care Ultrasector and Blackrock Lifepath Idx 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.