Correlation Between Tekla Healthcare and Large Capitalization

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

By analyzing existing cross correlation between Tekla Healthcare Investors and Large Capitalization Growth, you can compare the effects of market volatilities on Tekla Healthcare and Large Capitalization 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 Large Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tekla Healthcare and Large Capitalization.

Diversification Opportunities for Tekla Healthcare and Large Capitalization

0.59

Correlation Coefficient

Tekla Healthcare  Large Capitalization

Very weak diversification

The 3 months correlation between Tekla and Large is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Investors and Large Capitalization Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Capitalization 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 Investors are associated (or correlated) with Large Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Capitalization has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Large Capitalization go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Large Capitalization

Assuming the 90 days horizon Tekla Healthcare Investors is expected to generate 0.08 times more return on investment than Large Capitalization. However, Tekla Healthcare Investors is 13.2 times less risky than Large Capitalization. It trades about -0.14 of its potential returns per unit of risk. Large Capitalization Growth is currently generating about -0.23 per unit of risk. If you would invest  1,920  in Tekla Healthcare Investors on October 10, 2024 and sell it today you would lose (52.00) from holding Tekla Healthcare Investors or give up 2.71% of portfolio value over 90 days.

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

Tekla Healthcare Investors  vs.  Large Capitalization Growth

Tekla Healthcare Inv

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Large Capitalization

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Large Capitalization Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Tekla Healthcare and Large Capitalization

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

The idea behind Tekla Healthcare Investors and Large Capitalization Growth 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.