Correlation Between Vanguard Total and Tekla Healthcare

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

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

Diversification Opportunities for Vanguard Total and Tekla Healthcare

0.79

Correlation Coefficient

Vanguard Total  Tekla Healthcare

Poor diversification

The 3 months correlation between Vanguard and Tekla is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Tekla Healthcare Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Inv and Vanguard Total 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 Vanguard Total Stock are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Inv has no effect on the direction of Vanguard Total i.e., Vanguard Total and Tekla Healthcare go up and down completely randomly.

Pair Corralation between Vanguard Total and Tekla Healthcare

Assuming the 90 days horizon Vanguard Total Stock is expected to under-perform the Tekla Healthcare. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Total Stock is 1.25 times less risky than Tekla Healthcare. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Tekla Healthcare Investors is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,911  in Tekla Healthcare Investors on December 4, 2024 and sell it today you would lose (24.00) from holding Tekla Healthcare Investors or give up 1.26% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  Tekla Healthcare Investors

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

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

Tekla Healthcare Inv

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vanguard Total and Tekla Healthcare

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

The idea behind Vanguard Total Stock and Tekla Healthcare Investors 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.