Correlation Between Tekla Healthcare and Gmo Global

Can any of the company-specific risk be diversified away by investing in both Tekla Healthcare and Gmo Global 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 Gmo Global 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 Gmo Global Equity, you can compare the effects of market volatilities on Tekla Healthcare and Gmo Global 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 Gmo Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tekla Healthcare and Gmo Global.

Diversification Opportunities for Tekla Healthcare and Gmo Global

0.62

Correlation Coefficient

Tekla Healthcare  Gmo Global

Poor diversification

The 3 months correlation between Tekla and Gmo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Opportunities and Gmo Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Global Equity 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 Gmo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Global Equity has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Gmo Global go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Gmo Global

Considering the 90-day investment horizon Tekla Healthcare Opportunities is expected to generate 0.79 times more return on investment than Gmo Global. However, Tekla Healthcare Opportunities is 1.27 times less risky than Gmo Global. It trades about 0.24 of its potential returns per unit of risk. Gmo Global Equity is currently generating about 0.08 per unit of risk. If you would invest  1,793  in Tekla Healthcare Opportunities on December 19, 2024 and sell it today you would earn a total of  269.00  from holding Tekla Healthcare Opportunities or generate 15.0% return on investment over 90 days.

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

Tekla Healthcare Opportunities  vs.  Gmo Global Equity

Tekla Healthcare Opp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tekla Healthcare Opportunities are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively inconsistent technical indicators, Tekla Healthcare reported solid returns over the last few months and may actually be approaching a breakup point.

Gmo Global Equity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Global Equity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Gmo Global 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 Gmo Global

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

The idea behind Tekla Healthcare Opportunities and Gmo Global Equity 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.