Correlation Between Schwab Health and Gabelli Healthcare

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

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

Diversification Opportunities for Schwab Health and Gabelli Healthcare

0.95

Correlation Coefficient

Schwab Health  Gabelli Healthcare

Almost no diversification

The 3 months correlation between Schwab and Gabelli is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Health Care and The Gabelli Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Gabelli Healthcare and Schwab 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 Schwab Health Care are associated (or correlated) with Gabelli Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Gabelli Healthcare has no effect on the direction of Schwab Health i.e., Schwab Health and Gabelli Healthcare go up and down completely randomly.

Pair Corralation between Schwab Health and Gabelli Healthcare

Assuming the 90 days horizon Schwab Health Care is expected to under-perform the Gabelli Healthcare. But the mutual fund apears to be less risky and, when comparing its historical volatility, Schwab Health Care is 1.11 times less risky than Gabelli Healthcare. The mutual fund trades about -0.01 of its potential returns per unit of risk. The The Gabelli Healthcare is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,060  in The Gabelli Healthcare on September 26, 2024 and sell it today you would earn a total of  45.00  from holding The Gabelli Healthcare or generate 4.25% return on investment over 90 days.

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

Schwab Health Care  vs.  The Gabelli Healthcare

Schwab Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

The Gabelli Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Schwab Health and Gabelli Healthcare

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

The idea behind Schwab Health Care and The Gabelli Healthcare 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.