Correlation Between Blackrock Health and Tekla Healthcare

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

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

Diversification Opportunities for Blackrock Health and Tekla Healthcare

0.76

Correlation Coefficient

Blackrock Health  Tekla Healthcare

Poor diversification

The 3 months correlation between Blackrock and Tekla is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Health Sciences and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp and Blackrock 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 Blackrock Health Sciences 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 Opp has no effect on the direction of Blackrock Health i.e., Blackrock Health and Tekla Healthcare go up and down completely randomly.

Pair Corralation between Blackrock Health and Tekla Healthcare

Assuming the 90 days horizon Blackrock Health is expected to generate 7.32 times less return on investment than Tekla Healthcare. But when comparing it to its historical volatility, Blackrock Health Sciences is 1.44 times less risky than Tekla Healthcare. It trades about 0.05 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,822  in Tekla Healthcare Opportunities on December 20, 2024 and sell it today you would earn a total of  266.00  from holding Tekla Healthcare Opportunities or generate 14.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Blackrock Health Sciences  vs.  Tekla Healthcare Opportunities

Blackrock Health Sciences

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Health Sciences are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Blackrock Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tekla Healthcare Opp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tekla Healthcare Opportunities are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively inconsistent technical indicators, Tekla Healthcare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackrock Health and Tekla Healthcare

The main advantage of trading using opposite Blackrock Health and Tekla Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock Health 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 Blackrock Health Sciences and Tekla Healthcare Opportunities 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.