Correlation Between Health Care and Software And

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

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

Diversification Opportunities for Health Care and Software And

-0.26

Correlation Coefficient

Health Care  Software And

Very good diversification

The 3 months correlation between Health and Software is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Portfolio and Software And It in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software And It and Health Care 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 Health Care Portfolio are associated (or correlated) with Software And. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software And It has no effect on the direction of Health Care i.e., Health Care and Software And go up and down completely randomly.

Pair Corralation between Health Care and Software And

Assuming the 90 days horizon Health Care Portfolio is expected to under-perform the Software And. But the mutual fund apears to be less risky and, when comparing its historical volatility, Health Care Portfolio is 1.26 times less risky than Software And. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Software And It is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,640  in Software And It on September 4, 2024 and sell it today you would earn a total of  420.00  from holding Software And It or generate 15.91% return on investment over 90 days.

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

Health Care Portfolio  vs.  Software And It

Health Care Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Health Care is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Software And It

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Software And It are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Software And showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Health Care and Software And

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

The idea behind Health Care Portfolio and Software And It 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.