Correlation Between Global Healthcare and Invesco SP

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

Diversification Opportunities for Global Healthcare and Invesco SP

0.81

Correlation Coefficient

Global Healthcare  Invesco SP

Very poor diversification

The 3 months correlation between Global and Invesco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global Healthcare Income and Invesco SP International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP International 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP International has no effect on the direction of Global Healthcare i.e., Global Healthcare and Invesco SP go up and down completely randomly.

Pair Corralation between Global Healthcare and Invesco SP

Assuming the 90 days trading horizon Global Healthcare Income is expected to under-perform the Invesco SP. In addition to that, Global Healthcare is 2.31 times more volatile than Invesco SP International. It trades about -0.01 of its total potential returns per unit of risk. Invesco SP International is currently generating about 0.21 per unit of volatility. If you would invest  2,401  in Invesco SP International on December 1, 2024 and sell it today you would earn a total of  105.00  from holding Invesco SP International or generate 4.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.55%
Values	Daily Returns

Global Healthcare Income  vs.  Invesco SP International

Global Healthcare Income

Risk-Adjusted Performance

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 very healthy technical and fundamental indicators, Global Healthcare is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Invesco SP International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP International are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Invesco SP 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 Invesco SP

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

The idea behind Global Healthcare Income and Invesco SP International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.