Correlation Between Health Care and Commodityrealreturn

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

Diversification Opportunities for Health Care and Commodityrealreturn

0.24

Correlation Coefficient

Health Care  Commodityrealreturn

Modest diversification

The 3 months correlation between Health and Commodityrealreturn is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Commodityrealreturn Strategy F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodityrealreturn 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 Commodityrealreturn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodityrealreturn has no effect on the direction of Health Care i.e., Health Care and Commodityrealreturn go up and down completely randomly.

Pair Corralation between Health Care and Commodityrealreturn

Assuming the 90 days horizon Health Care Ultrasector is expected to under-perform the Commodityrealreturn. In addition to that, Health Care is 1.83 times more volatile than Commodityrealreturn Strategy Fund. It trades about -0.15 of its total potential returns per unit of risk. Commodityrealreturn Strategy Fund is currently generating about 0.0 per unit of volatility. If you would invest  1,094  in Commodityrealreturn Strategy Fund on October 11, 2024 and sell it today you would lose (1.00) from holding Commodityrealreturn Strategy Fund or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Health Care Ultrasector  vs.  Commodityrealreturn Strategy F

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.

Commodityrealreturn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commodityrealreturn Strategy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Commodityrealreturn 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 Commodityrealreturn

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

The idea behind Health Care Ultrasector and Commodityrealreturn Strategy Fund 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.