Correlation Between Global Healthcare and Bloom Select

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

By analyzing existing cross correlation between Global Healthcare Income and Bloom Select Income, you can compare the effects of market volatilities on Global Healthcare and Bloom Select 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 Global Healthcare with a short position of Bloom Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Healthcare and Bloom Select.

Diversification Opportunities for Global Healthcare and Bloom Select

-0.75

Correlation Coefficient

Global Healthcare  Bloom Select

Pay attention - limited upside

The 3 months correlation between Global and Bloom is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Global Healthcare Income and Bloom Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloom Select Income and Global 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 Global Healthcare Income are associated (or correlated) with Bloom Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloom Select Income has no effect on the direction of Global Healthcare i.e., Global Healthcare and Bloom Select go up and down completely randomly.

Pair Corralation between Global Healthcare and Bloom Select

Assuming the 90 days trading horizon Global Healthcare Income is expected to under-perform the Bloom Select. But the fund apears to be less risky and, when comparing its historical volatility, Global Healthcare Income is 1.21 times less risky than Bloom Select. The fund trades about -0.08 of its potential returns per unit of risk. The Bloom Select Income is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  791.00  in Bloom Select Income on September 2, 2024 and sell it today you would earn a total of  6.00  from holding Bloom Select Income or generate 0.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.06%
Values	Daily Returns

Global Healthcare Income  vs.  Bloom Select Income

Global Healthcare Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Healthcare Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy technical and fundamental indicators, Global Healthcare is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Bloom Select Income

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Bloom Select Income has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental drivers, Bloom Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Healthcare and Bloom Select

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

The idea behind Global Healthcare Income and Bloom Select Income 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.