Correlation Between Total Return and Eventide Healthcare

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

By analyzing existing cross correlation between Total Return Bond and Eventide Healthcare Life, you can compare the effects of market volatilities on Total Return and Eventide Healthcare 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 Total Return with a short position of Eventide Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Eventide Healthcare.

Diversification Opportunities for Total Return and Eventide Healthcare

0.66

Correlation Coefficient

Total Return  Eventide Healthcare

Poor diversification

The 3 months correlation between Total and Eventide is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Bond and Eventide Healthcare Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Healthcare Life and Total Return 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 Total Return Bond are associated (or correlated) with Eventide Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Healthcare Life has no effect on the direction of Total Return i.e., Total Return and Eventide Healthcare go up and down completely randomly.

Pair Corralation between Total Return and Eventide Healthcare

Assuming the 90 days horizon Total Return Bond is expected to generate 0.21 times more return on investment than Eventide Healthcare. However, Total Return Bond is 4.78 times less risky than Eventide Healthcare. It trades about -0.04 of its potential returns per unit of risk. Eventide Healthcare Life is currently generating about -0.08 per unit of risk. If you would invest  1,096  in Total Return Bond on October 23, 2024 and sell it today you would lose (8.00) from holding Total Return Bond or give up 0.73% of portfolio value over 90 days.

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

Total Return Bond  vs.  Eventide Healthcare Life

Total Return Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Return Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Total Return is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eventide Healthcare Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eventide Healthcare Life has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical 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 Total Return and Eventide Healthcare

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

The idea behind Total Return Bond and Eventide Healthcare Life 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.