Correlation Between Health Biotchnology and Utilities Fund

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

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

Diversification Opportunities for Health Biotchnology and Utilities Fund

-0.29

Correlation Coefficient

Health Biotchnology  Utilities Fund

Very good diversification

The 3 months correlation between Health and Utilities is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio and Utilities Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Fund Class and Health Biotchnology 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 Biotchnology Portfolio are associated (or correlated) with Utilities Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Fund Class has no effect on the direction of Health Biotchnology i.e., Health Biotchnology and Utilities Fund go up and down completely randomly.

Pair Corralation between Health Biotchnology and Utilities Fund

Assuming the 90 days horizon Health Biotchnology Portfolio is expected to under-perform the Utilities Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Health Biotchnology Portfolio is 1.21 times less risky than Utilities Fund. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Utilities Fund Class is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,983  in Utilities Fund Class on September 13, 2024 and sell it today you would earn a total of  4.00  from holding Utilities Fund Class or generate 0.08% return on investment over 90 days.

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

Health Biotchnology Portfolio  vs.  Utilities Fund Class

Health Biotchnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Biotchnology Portfolio 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.

Utilities Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Health Biotchnology and Utilities Fund

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

The idea behind Health Biotchnology Portfolio and Utilities Fund Class 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 Transaction History module to view history of all your transactions and understand their impact on performance.