Correlation Between Health Care and Df Dent

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

By analyzing existing cross correlation between Health Care Ultrasector and Df Dent Midcap, you can compare the effects of market volatilities on Health Care and Df Dent 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 Df Dent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Df Dent.

Diversification Opportunities for Health Care and Df Dent

0.23

Correlation Coefficient

Health Care  Df Dent

Modest diversification

The 3 months correlation between Health and DFMLX is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Df Dent Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Df Dent Midcap 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 Ultrasector are associated (or correlated) with Df Dent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Df Dent Midcap has no effect on the direction of Health Care i.e., Health Care and Df Dent go up and down completely randomly.

Pair Corralation between Health Care and Df Dent

Assuming the 90 days horizon Health Care is expected to generate 1.45 times less return on investment than Df Dent. In addition to that, Health Care is 1.7 times more volatile than Df Dent Midcap. It trades about 0.08 of its total potential returns per unit of risk. Df Dent Midcap is currently generating about 0.19 per unit of volatility. If you would invest  3,679  in Df Dent Midcap on May 26, 2025 and sell it today you would earn a total of  369.00  from holding Df Dent Midcap or generate 10.03% return on investment over 90 days.

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

Health Care Ultrasector  vs.  Df Dent Midcap

Health Care Ultrasector

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Health Care Ultrasector are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Health Care may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Df Dent Midcap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Df Dent Midcap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Df Dent may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Health Care and Df Dent

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

The idea behind Health Care Ultrasector and Df Dent Midcap 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.