Correlation Between Science Applications and Lion Biotechnologies
Can any of the company-specific risk be diversified away by investing in both Science Applications and Lion Biotechnologies 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 Science Applications and Lion Biotechnologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Applications International and Lion Biotechnologies, you can compare the effects of market volatilities on Science Applications and Lion Biotechnologies 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 Science Applications with a short position of Lion Biotechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and Lion Biotechnologies.
Diversification Opportunities for Science Applications and Lion Biotechnologies
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Science and Lion is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and Lion Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Biotechnologies and Science Applications 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 Science Applications International are associated (or correlated) with Lion Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Biotechnologies has no effect on the direction of Science Applications i.e., Science Applications and Lion Biotechnologies go up and down completely randomly.
Pair Corralation between Science Applications and Lion Biotechnologies
Assuming the 90 days trading horizon Science Applications International is expected to generate 0.81 times more return on investment than Lion Biotechnologies. However, Science Applications International is 1.24 times less risky than Lion Biotechnologies. It trades about -0.11 of its potential returns per unit of risk. Lion Biotechnologies is currently generating about -0.19 per unit of risk. If you would invest 13,200 in Science Applications International on August 25, 2024 and sell it today you would lose (1,400) from holding Science Applications International or give up 10.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Science Applications Internati vs. Lion Biotechnologies
Performance |
| Timeline |
| Science Applications |
| Lion Biotechnologies |
Science Applications and Lion Biotechnologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Science Applications and Lion Biotechnologies
The main advantage of trading using opposite Science Applications and Lion Biotechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications position performs unexpectedly, Lion Biotechnologies 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 Lion Biotechnologies will offset losses from the drop in Lion Biotechnologies' long position.| Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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