Correlation Between Investment and Tekla Healthcare

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

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

Diversification Opportunities for Investment and Tekla Healthcare

0.4

Correlation Coefficient

Investment  Tekla Healthcare

Very weak diversification

The 3 months correlation between Investment and Tekla is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Investment Of America and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp and Investment 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 Investment Of America are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Opp has no effect on the direction of Investment i.e., Investment and Tekla Healthcare go up and down completely randomly.

Pair Corralation between Investment and Tekla Healthcare

Assuming the 90 days horizon Investment Of America is expected to generate 0.9 times more return on investment than Tekla Healthcare. However, Investment Of America is 1.12 times less risky than Tekla Healthcare. It trades about 0.1 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about 0.08 per unit of risk. If you would invest  4,031  in Investment Of America on December 2, 2024 and sell it today you would earn a total of  1,874  from holding Investment Of America or generate 46.49% return on investment over 90 days.

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

Investment Of America  vs.  Tekla Healthcare Opportunities

Investment Of America

Risk-Adjusted Performance

Very Weak

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

Tekla Healthcare Opp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tekla Healthcare Opportunities are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable technical indicators, Tekla Healthcare is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Investment and Tekla Healthcare

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

The idea behind Investment Of America and Tekla Healthcare Opportunities 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..