Correlation Between Energy Fund and Tekla Healthcare

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

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

Diversification Opportunities for Energy Fund and Tekla Healthcare

0.34

Correlation Coefficient

Energy Fund  Tekla Healthcare

Weak diversification

The 3 months correlation between Energy and Tekla is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fund Class and Tekla Healthcare Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Inv and Energy Fund 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 Energy Fund Class 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 Inv has no effect on the direction of Energy Fund i.e., Energy Fund and Tekla Healthcare go up and down completely randomly.

Pair Corralation between Energy Fund and Tekla Healthcare

Assuming the 90 days horizon Energy Fund Class is expected to generate 1.18 times more return on investment than Tekla Healthcare. However, Energy Fund is 1.18 times more volatile than Tekla Healthcare Investors. It trades about 0.07 of its potential returns per unit of risk. Tekla Healthcare Investors is currently generating about -0.01 per unit of risk. If you would invest  18,057  in Energy Fund Class on December 20, 2024 and sell it today you would earn a total of  977.00  from holding Energy Fund Class or generate 5.41% return on investment over 90 days.

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

Energy Fund Class  vs.  Tekla Healthcare Investors

Energy Fund Class

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Fund Class are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Energy Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tekla Healthcare Inv

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Energy Fund and Tekla Healthcare

The main advantage of trading using opposite Energy Fund and Tekla Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Fund 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 Energy Fund Class and Tekla Healthcare Investors 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.