Correlation Between Tekla Healthcare and Largecap Value

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

Diversification Opportunities for Tekla Healthcare and Largecap Value

0.42

Correlation Coefficient

Tekla Healthcare  Largecap Value

Very weak diversification

The 3 months correlation between Tekla and Largecap is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Opportunities and Largecap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Largecap Value 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 Largecap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Largecap Value has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Largecap Value go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Largecap Value

Considering the 90-day investment horizon Tekla Healthcare Opportunities is expected to generate 1.34 times more return on investment than Largecap Value. However, Tekla Healthcare is 1.34 times more volatile than Largecap Value Fund. It trades about 0.16 of its potential returns per unit of risk. Largecap Value Fund is currently generating about 0.02 per unit of risk. If you would invest  1,846  in Tekla Healthcare Opportunities on December 28, 2024 and sell it today you would earn a total of  184.00  from holding Tekla Healthcare Opportunities or generate 9.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Tekla Healthcare Opportunities  vs.  Largecap Value Fund

Tekla Healthcare Opp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tekla Healthcare Opportunities are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively inconsistent technical indicators, Tekla Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Largecap Value

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Largecap Value Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Largecap Value 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 Largecap Value

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

The idea behind Tekla Healthcare Opportunities and Largecap Value 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.