Correlation Between Financial Select and Health Care
Can any of the company-specific risk be diversified away by investing in both Financial Select 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 Financial Select and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Select Sector and Health Care Select, you can compare the effects of market volatilities on Financial Select 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 Financial Select with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and Health Care.
Diversification Opportunities for Financial Select and Health Care
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financial and Health is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select and Financial Select 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 Financial Select Sector 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 Select has no effect on the direction of Financial Select i.e., Financial Select and Health Care go up and down completely randomly.
Pair Corralation between Financial Select and Health Care
Considering the 90-day investment horizon Financial Select Sector is expected to generate 1.17 times more return on investment than Health Care. However, Financial Select is 1.17 times more volatile than Health Care Select. It trades about 0.12 of its potential returns per unit of risk. Health Care Select is currently generating about 0.04 per unit of risk. If you would invest 3,474 in Financial Select Sector on January 24, 2024 and sell it today you would earn a total of 613.00 from holding Financial Select Sector or generate 17.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.46% |
Values | Daily Returns |
Financial Select Sector vs. Health Care Select
Performance |
Timeline |
Financial Select Sector |
Health Care Select |
Financial Select and Health Care Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Financial Select and Health Care
The main advantage of trading using opposite Financial Select and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select 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.Financial Select vs. Virtus InfraCap Preferred | Financial Select vs. XAI Octagon Floating | Financial Select vs. Amplify High Income | Financial Select vs. Triplepoint Venture Growth |
Health Care vs. Consumer Staples Select | Health Care vs. Industrial Select Sector | Health Care vs. Consumer Discretionary Select | Health Care vs. Utilities Select Sector |
Check out your portfolio center.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
Transaction History View history of all your transactions and understand their impact on performance | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
Fundamental Analysis View fundamental data based on most recent published financial statements | |
USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |