Correlation Between Tekla Healthcare and Spectrum Fund

Can any of the company-specific risk be diversified away by investing in both Tekla Healthcare and Spectrum Fund 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 Spectrum Fund 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 Spectrum Fund Institutional, you can compare the effects of market volatilities on Tekla Healthcare and Spectrum Fund 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 Spectrum Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tekla Healthcare and Spectrum Fund.

Diversification Opportunities for Tekla Healthcare and Spectrum Fund

0.47

Correlation Coefficient

Tekla Healthcare  Spectrum Fund

Very weak diversification

The 3 months correlation between Tekla and Spectrum is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Investors and Spectrum Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Fund Instit 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 Spectrum Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Fund Instit has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Spectrum Fund go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Spectrum Fund

Assuming the 90 days horizon Tekla Healthcare Investors is expected to under-perform the Spectrum Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Tekla Healthcare Investors is 1.26 times less risky than Spectrum Fund. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Spectrum Fund Institutional is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,491  in Spectrum Fund Institutional on October 9, 2024 and sell it today you would lose (113.00) from holding Spectrum Fund Institutional or give up 7.58% 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.  Spectrum Fund Institutional

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.

Spectrum Fund Instit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Tekla Healthcare and Spectrum Fund

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

The idea behind Tekla Healthcare Investors and Spectrum Fund Institutional 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.