Correlation Between Tech Leaders and Global Healthcare

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

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

Diversification Opportunities for Tech Leaders and Global Healthcare

0.09

Correlation Coefficient

Tech Leaders  Global Healthcare

Significant diversification

The 3 months correlation between Tech and Global is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Tech Leaders Income and Global Healthcare Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Healthcare Income and Tech Leaders 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 Tech Leaders Income are associated (or correlated) with Global Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Healthcare Income has no effect on the direction of Tech Leaders i.e., Tech Leaders and Global Healthcare go up and down completely randomly.

Pair Corralation between Tech Leaders and Global Healthcare

Assuming the 90 days trading horizon Tech Leaders Income is expected to generate 1.05 times more return on investment than Global Healthcare. However, Tech Leaders is 1.05 times more volatile than Global Healthcare Income. It trades about 0.39 of its potential returns per unit of risk. Global Healthcare Income is currently generating about 0.0 per unit of risk. If you would invest  2,006  in Tech Leaders Income on April 22, 2025 and sell it today you would earn a total of  596.00  from holding Tech Leaders Income or generate 29.71% return on investment over 90 days.

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

Tech Leaders Income  vs.  Global Healthcare Income

Tech Leaders Income

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tech Leaders Income are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Tech Leaders displayed solid returns over the last few months and may actually be approaching a breakup point.

Global Healthcare Income

Risk-Adjusted Performance

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.

Pair Trading with Tech Leaders and Global Healthcare

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

The idea behind Tech Leaders Income and Global Healthcare 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.