Correlation Between Tekla Healthcare and Blackrock Health

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

Diversification Opportunities for Tekla Healthcare and Blackrock Health

0.8

Correlation Coefficient

Tekla Healthcare  Blackrock Health

Very poor diversification

The 3 months correlation between Tekla and BLACKROCK is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Opportunities and Blackrock Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Health Sciences 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 Blackrock Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Health Sciences has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Blackrock Health go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Blackrock Health

Considering the 90-day investment horizon Tekla Healthcare Opportunities is expected to generate 1.44 times more return on investment than Blackrock Health. However, Tekla Healthcare is 1.44 times more volatile than Blackrock Health Sciences. It trades about -0.02 of its potential returns per unit of risk. Blackrock Health Sciences is currently generating about -0.09 per unit of risk. If you would invest  2,117  in Tekla Healthcare Opportunities on September 3, 2024 and sell it today you would lose (29.00) from holding Tekla Healthcare Opportunities or give up 1.37% of portfolio value over 90 days.

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

Tekla Healthcare Opportunities  vs.  Blackrock Health Sciences

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 relatively invariable technical indicators, Tekla Healthcare is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Blackrock Health Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Health Sciences has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock Health 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 Blackrock Health

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

The idea behind Tekla Healthcare Opportunities and Blackrock Health Sciences 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.