Correlation Between Leisure Fund and Health Care

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

By analyzing existing cross correlation between Leisure Fund Investor and Health Care Fund, you can compare the effects of market volatilities on Leisure Fund and Health Care 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 Leisure Fund with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leisure Fund and Health Care.

Diversification Opportunities for Leisure Fund and Health Care

0.58

Correlation Coefficient

Leisure Fund  Health Care

Very weak diversification

The 3 months correlation between Leisure and Health is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Leisure Fund Investor and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund and Leisure 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 Leisure Fund Investor are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of Leisure Fund i.e., Leisure Fund and Health Care go up and down completely randomly.

Pair Corralation between Leisure Fund and Health Care

Assuming the 90 days horizon Leisure Fund Investor is expected to under-perform the Health Care. In addition to that, Leisure Fund is 1.33 times more volatile than Health Care Fund. It trades about -0.02 of its total potential returns per unit of risk. Health Care Fund is currently generating about 0.06 per unit of volatility. If you would invest  12,441  in Health Care Fund on December 22, 2024 and sell it today you would earn a total of  309.00  from holding Health Care Fund or generate 2.48% return on investment over 90 days.

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

Leisure Fund Investor  vs.  Health Care Fund

Leisure Fund Investor

Risk-Adjusted Performance

Very Weak

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

Health Care Fund

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Health Care Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Health Care is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leisure Fund and Health Care

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

The idea behind Leisure Fund Investor and Health Care Fund 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.