Correlation Between Insurance Portfolio and Health Care

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

By analyzing existing cross correlation between Insurance Portfolio Insurance and Health Care Services, you can compare the effects of market volatilities on Insurance Portfolio and Health Care 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 Insurance Portfolio with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Portfolio and Health Care.

Diversification Opportunities for Insurance Portfolio and Health Care

-0.32

Correlation Coefficient

Insurance Portfolio  Health Care

Very good diversification

The 3 months correlation between Insurance and Health is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Portfolio Insurance and Health Care Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Services and Insurance Portfolio 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 Insurance Portfolio Insurance are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Services has no effect on the direction of Insurance Portfolio i.e., Insurance Portfolio and Health Care go up and down completely randomly.

Pair Corralation between Insurance Portfolio and Health Care

Assuming the 90 days horizon Insurance Portfolio Insurance is expected to generate 0.86 times more return on investment than Health Care. However, Insurance Portfolio Insurance is 1.16 times less risky than Health Care. It trades about 0.02 of its potential returns per unit of risk. Health Care Services is currently generating about -0.14 per unit of risk. If you would invest  9,541  in Insurance Portfolio Insurance on September 13, 2024 and sell it today you would earn a total of  96.00  from holding Insurance Portfolio Insurance or generate 1.01% return on investment over 90 days.

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

Insurance Portfolio Insurance  vs.  Health Care Services

Insurance Portfolio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Portfolio Insurance are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Insurance Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Health Care Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Services has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Insurance Portfolio and Health Care

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

The idea behind Insurance Portfolio Insurance and Health Care Services 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.