Correlation Between Tekla Healthcare and Vanguard Gnma

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

By analyzing existing cross correlation between Tekla Healthcare Opportunities and Vanguard Gnma Fund, you can compare the effects of market volatilities on Tekla Healthcare and Vanguard Gnma 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 Tekla Healthcare with a short position of Vanguard Gnma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tekla Healthcare and Vanguard Gnma.

Diversification Opportunities for Tekla Healthcare and Vanguard Gnma

0.65

Correlation Coefficient

Tekla Healthcare  Vanguard Gnma

Poor diversification

The 3 months correlation between Tekla and Vanguard is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Opportunities and Vanguard Gnma Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Gnma and Tekla 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 Tekla Healthcare Opportunities are associated (or correlated) with Vanguard Gnma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Gnma has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Vanguard Gnma go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Vanguard Gnma

Considering the 90-day investment horizon Tekla Healthcare Opportunities is expected to under-perform the Vanguard Gnma. In addition to that, Tekla Healthcare is 3.9 times more volatile than Vanguard Gnma Fund. It trades about -0.18 of its total potential returns per unit of risk. Vanguard Gnma Fund is currently generating about -0.16 per unit of volatility. If you would invest  942.00  in Vanguard Gnma Fund on September 23, 2024 and sell it today you would lose (29.00) from holding Vanguard Gnma Fund or give up 3.08% of portfolio value over 90 days.

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

Tekla Healthcare Opportunities  vs.  Vanguard Gnma Fund

Tekla Healthcare Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Even with inconsistent performance in the last few months, the Fund's technical indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the fund retail investors.

Vanguard Gnma

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tekla Healthcare and Vanguard Gnma

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

The idea behind Tekla Healthcare Opportunities and Vanguard Gnma Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.