Correlation Between Tekla Healthcare and Equinox Chesapeake

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

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

Diversification Opportunities for Tekla Healthcare and Equinox Chesapeake

0.29

Correlation Coefficient

Tekla Healthcare  Equinox Chesapeake

Modest diversification

The 3 months correlation between Tekla and Equinox is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Opportunities and Equinox Chesapeake Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinox Chesapeake and Tekla Healthcare 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 Tekla Healthcare Opportunities are associated (or correlated) with Equinox Chesapeake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinox Chesapeake has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Equinox Chesapeake go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Equinox Chesapeake

Considering the 90-day investment horizon Tekla Healthcare Opportunities is expected to generate 1.03 times more return on investment than Equinox Chesapeake. However, Tekla Healthcare is 1.03 times more volatile than Equinox Chesapeake Strategy. It trades about -0.02 of its potential returns per unit of risk. Equinox Chesapeake Strategy is currently generating about -0.06 per unit of risk. If you would invest  1,950  in Tekla Healthcare Opportunities on September 23, 2024 and sell it today you would lose (79.00) from holding Tekla Healthcare Opportunities or give up 4.05% of portfolio value over 90 days.

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

Tekla Healthcare Opportunities  vs.  Equinox Chesapeake Strategy

Tekla Healthcare Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Even with inconsistent performance in the last few months, the Fund's technical indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the fund retail investors.

Equinox Chesapeake

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tekla Healthcare and Equinox Chesapeake

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

The idea behind Tekla Healthcare Opportunities and Equinox Chesapeake Strategy 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.