Correlation Between Global Healthcare and CDSPI Petite

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

By analyzing existing cross correlation between Global Healthcare Income and CDSPI petite cap, you can compare the effects of market volatilities on Global Healthcare and CDSPI Petite 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 Global Healthcare with a short position of CDSPI Petite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Healthcare and CDSPI Petite.

Diversification Opportunities for Global Healthcare and CDSPI Petite

-0.49

Correlation Coefficient

Global Healthcare  CDSPI Petite

Very good diversification

The 3 months correlation between Global and CDSPI is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Global Healthcare Income and CDSPI petite cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDSPI petite cap and Global Healthcare 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 Global Healthcare Income are associated (or correlated) with CDSPI Petite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDSPI petite cap has no effect on the direction of Global Healthcare i.e., Global Healthcare and CDSPI Petite go up and down completely randomly.

Pair Corralation between Global Healthcare and CDSPI Petite

Assuming the 90 days trading horizon Global Healthcare Income is expected to under-perform the CDSPI Petite. But the fund apears to be less risky and, when comparing its historical volatility, Global Healthcare Income is 1.44 times less risky than CDSPI Petite. The fund trades about -0.16 of its potential returns per unit of risk. The CDSPI petite cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,726  in CDSPI petite cap on October 12, 2024 and sell it today you would earn a total of  385.00  from holding CDSPI petite cap or generate 5.72% return on investment over 90 days.

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

Global Healthcare Income  vs.  CDSPI petite cap

Global Healthcare Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Healthcare Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

CDSPI petite cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CDSPI petite cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, CDSPI Petite is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Healthcare and CDSPI Petite

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

The idea behind Global Healthcare Income and CDSPI petite 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.