Correlation Between Global Healthcare and IShares Fundamental

Can any of the company-specific risk be diversified away by investing in both Global Healthcare and IShares Fundamental 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 IShares Fundamental 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 iShares Fundamental Hedged, you can compare the effects of market volatilities on Global Healthcare and IShares Fundamental 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 IShares Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Healthcare and IShares Fundamental.

Diversification Opportunities for Global Healthcare and IShares Fundamental

-0.75

Correlation Coefficient

Global Healthcare  IShares Fundamental

Pay attention - limited upside

The 3 months correlation between Global and IShares is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Global Healthcare Income and iShares Fundamental Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fundamental 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 IShares Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fundamental has no effect on the direction of Global Healthcare i.e., Global Healthcare and IShares Fundamental go up and down completely randomly.

Pair Corralation between Global Healthcare and IShares Fundamental

Assuming the 90 days trading horizon Global Healthcare is expected to generate 18.2 times less return on investment than IShares Fundamental. In addition to that, Global Healthcare is 1.06 times more volatile than iShares Fundamental Hedged. It trades about 0.02 of its total potential returns per unit of risk. iShares Fundamental Hedged is currently generating about 0.33 per unit of volatility. If you would invest  5,423  in iShares Fundamental Hedged on September 1, 2024 and sell it today you would earn a total of  322.00  from holding iShares Fundamental Hedged or generate 5.94% return on investment over 90 days.

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

Global Healthcare Income  vs.  iShares Fundamental Hedged

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.

iShares Fundamental

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fundamental Hedged are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Fundamental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Global Healthcare and IShares Fundamental

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

The idea behind Global Healthcare Income and iShares Fundamental Hedged 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.