Correlation Between Tekla Healthcare and Morningstar Defensive

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

Diversification Opportunities for Tekla Healthcare and Morningstar Defensive

0.6

Correlation Coefficient

Tekla Healthcare  Morningstar Defensive

Poor diversification

The 3 months correlation between Tekla and Morningstar is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Opportunities and Morningstar Defensive Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Defensive 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 Morningstar Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Defensive has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Morningstar Defensive go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Morningstar Defensive

Considering the 90-day investment horizon Tekla Healthcare Opportunities is expected to generate 5.86 times more return on investment than Morningstar Defensive. However, Tekla Healthcare is 5.86 times more volatile than Morningstar Defensive Bond. It trades about 0.04 of its potential returns per unit of risk. Morningstar Defensive Bond is currently generating about 0.13 per unit of risk. If you would invest  1,671  in Tekla Healthcare Opportunities on September 28, 2024 and sell it today you would earn a total of  258.00  from holding Tekla Healthcare Opportunities or generate 15.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Tekla Healthcare Opportunities  vs.  Morningstar Defensive Bond

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 latest inconsistent performance, the Fund's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the fund retail investors.

Morningstar Defensive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morningstar Defensive Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Morningstar Defensive 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 Morningstar Defensive

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

The idea behind Tekla Healthcare Opportunities and Morningstar Defensive Bond 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.