Correlation Between WELL Health and IShares Fundamental

Can any of the company-specific risk be diversified away by investing in both WELL Health and IShares Fundamental 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 WELL Health and IShares Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WELL Health Technologies and iShares Fundamental Hedged, you can compare the effects of market volatilities on WELL Health and IShares Fundamental 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 WELL Health with a short position of IShares Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of WELL Health and IShares Fundamental.

Diversification Opportunities for WELL Health and IShares Fundamental

0.88

Correlation Coefficient

WELL Health  IShares Fundamental

Very poor diversification

The 3 months correlation between WELL and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WELL Health Technologies and iShares Fundamental Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fundamental and WELL Health 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 WELL Health Technologies are associated (or correlated) with IShares Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fundamental has no effect on the direction of WELL Health i.e., WELL Health and IShares Fundamental go up and down completely randomly.

Pair Corralation between WELL Health and IShares Fundamental

Assuming the 90 days trading horizon WELL Health Technologies is expected to generate 3.81 times more return on investment than IShares Fundamental. However, WELL Health is 3.81 times more volatile than iShares Fundamental Hedged. It trades about 0.2 of its potential returns per unit of risk. iShares Fundamental Hedged is currently generating about 0.18 per unit of risk. If you would invest  436.00  in WELL Health Technologies on September 1, 2024 and sell it today you would earn a total of  150.00  from holding WELL Health Technologies or generate 34.4% return on investment over 90 days.

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

WELL Health Technologies  vs.  iShares Fundamental Hedged

WELL Health Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WELL Health Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, WELL Health displayed solid returns over the last few months and may actually be approaching a breakup point.

iShares Fundamental

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fundamental Hedged are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Fundamental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with WELL Health and IShares Fundamental

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

The idea behind WELL Health Technologies and iShares Fundamental Hedged 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.