Correlation Between Worldwide Healthcare and Raytheon Technologies

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

By analyzing existing cross correlation between Worldwide Healthcare Trust and Raytheon Technologies Corp, you can compare the effects of market volatilities on Worldwide Healthcare and Raytheon Technologies 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 Worldwide Healthcare with a short position of Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Worldwide Healthcare and Raytheon Technologies.

Diversification Opportunities for Worldwide Healthcare and Raytheon Technologies

-0.01

Correlation Coefficient

Worldwide Healthcare  Raytheon Technologies

Good diversification

The 3 months correlation between Worldwide and Raytheon is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Worldwide Healthcare Trust and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and Worldwide 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 Worldwide Healthcare Trust are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Worldwide Healthcare i.e., Worldwide Healthcare and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Worldwide Healthcare and Raytheon Technologies

Assuming the 90 days trading horizon Worldwide Healthcare Trust is expected to under-perform the Raytheon Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Worldwide Healthcare Trust is 1.37 times less risky than Raytheon Technologies. The stock trades about -0.16 of its potential returns per unit of risk. The Raytheon Technologies Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  12,412  in Raytheon Technologies Corp on September 2, 2024 and sell it today you would lose (335.00) from holding Raytheon Technologies Corp or give up 2.7% of portfolio value over 90 days.

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

Worldwide Healthcare Trust  vs.  Raytheon Technologies Corp

Worldwide Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worldwide Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Raytheon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytheon Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Worldwide Healthcare and Raytheon Technologies

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

The idea behind Worldwide Healthcare Trust and Raytheon Technologies Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.