Correlation Between Blackrock Health and Health Care

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

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

Diversification Opportunities for Blackrock Health and Health Care

0.82

Correlation Coefficient

Blackrock Health  Health Care

Very poor diversification

The 3 months correlation between Blackrock and Health is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Health Sciences and Health Care Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Portfolio and Blackrock Health 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 Blackrock Health Sciences 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 Portfolio has no effect on the direction of Blackrock Health i.e., Blackrock Health and Health Care go up and down completely randomly.

Pair Corralation between Blackrock Health and Health Care

Assuming the 90 days horizon Blackrock Health Sciences is expected to under-perform the Health Care. But the mutual fund apears to be less risky and, when comparing its historical volatility, Blackrock Health Sciences is 1.16 times less risky than Health Care. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Health Care Portfolio is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,157  in Health Care Portfolio on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Health Care Portfolio or generate 0.0% return on investment over 90 days.

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

Blackrock Health Sciences  vs.  Health Care Portfolio

Blackrock Health Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Blackrock Health and Health Care

The main advantage of trading using opposite Blackrock Health and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock Health 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 Blackrock Health Sciences and Health Care Portfolio 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.