Correlation Between Healthcare Special and AGF American

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

By analyzing existing cross correlation between Healthcare Special Opportunities and AGF American Growth, you can compare the effects of market volatilities on Healthcare Special and AGF American 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 Healthcare Special with a short position of AGF American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Special and AGF American.

Diversification Opportunities for Healthcare Special and AGF American

0.35

Correlation Coefficient

Healthcare Special  AGF American

Weak diversification

The 3 months correlation between Healthcare and AGF is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Special Opportuniti and AGF American Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF American Growth and Healthcare Special 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 Healthcare Special Opportunities are associated (or correlated) with AGF American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF American Growth has no effect on the direction of Healthcare Special i.e., Healthcare Special and AGF American go up and down completely randomly.

Pair Corralation between Healthcare Special and AGF American

Assuming the 90 days trading horizon Healthcare Special Opportunities is expected to generate 0.86 times more return on investment than AGF American. However, Healthcare Special Opportunities is 1.16 times less risky than AGF American. It trades about -0.01 of its potential returns per unit of risk. AGF American Growth is currently generating about -0.08 per unit of risk. If you would invest  1,300  in Healthcare Special Opportunities on December 24, 2024 and sell it today you would lose (12.00) from holding Healthcare Special Opportunities or give up 0.92% of portfolio value over 90 days.

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

Healthcare Special Opportuniti  vs.  AGF American Growth

Healthcare Special

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Special Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Healthcare Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AGF American Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days AGF American Growth has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Healthcare Special and AGF American

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

The idea behind Healthcare Special Opportunities and AGF American Growth 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.