Correlation Between Health Care and Copeland Risk

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

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

Diversification Opportunities for Health Care and Copeland Risk

0.84

Correlation Coefficient

Health Care  Copeland Risk

Very poor diversification

The 3 months correlation between Health and Copeland is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Copeland Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copeland Risk Managed and Health Care 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 Health Care Fund are associated (or correlated) with Copeland Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copeland Risk Managed has no effect on the direction of Health Care i.e., Health Care and Copeland Risk go up and down completely randomly.

Pair Corralation between Health Care and Copeland Risk

Assuming the 90 days horizon Health Care Fund is expected to under-perform the Copeland Risk. But the mutual fund apears to be less risky and, when comparing its historical volatility, Health Care Fund is 1.16 times less risky than Copeland Risk. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Copeland Risk Managed is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,231  in Copeland Risk Managed on February 8, 2024 and sell it today you would lose (8.00) from holding Copeland Risk Managed or give up 0.65% of portfolio value over 90 days.

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

Health Care Fund  vs.  Copeland Risk Managed

Health Care Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Copeland Risk Managed

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Copeland Risk Managed are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Copeland Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Health Care and Copeland Risk

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

The idea behind Health Care Fund and Copeland Risk Managed 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.