Correlation Between Associated British and International Biotechnology
Can any of the company-specific risk be diversified away by investing in both Associated British and International Biotechnology 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 Associated British and International Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and International Biotechnology Trust, you can compare the effects of market volatilities on Associated British and International Biotechnology 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 Associated British with a short position of International Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and International Biotechnology.
Diversification Opportunities for Associated British and International Biotechnology
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Associated and International is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and International Biotechnology Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Biotechnology and Associated British 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 Associated British Foods are associated (or correlated) with International Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Biotechnology has no effect on the direction of Associated British i.e., Associated British and International Biotechnology go up and down completely randomly.
Pair Corralation between Associated British and International Biotechnology
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the International Biotechnology. In addition to that, Associated British is 1.11 times more volatile than International Biotechnology Trust. It trades about -0.01 of its total potential returns per unit of risk. International Biotechnology Trust is currently generating about 0.06 per unit of volatility. If you would invest 59,950 in International Biotechnology Trust on September 12, 2024 and sell it today you would earn a total of 11,250 from holding International Biotechnology Trust or generate 18.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. International Biotechnology Tr
Performance |
| Timeline |
| Associated British Foods |
| International Biotechnology |
Associated British and International Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and International Biotechnology
The main advantage of trading using opposite Associated British and International Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, International Biotechnology 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 International Biotechnology will offset losses from the drop in International Biotechnology's long position.| Associated British vs. Inspiration Healthcare Group | Associated British vs. Universal Health Services | Associated British vs. Naturhouse Health SA | Associated British vs. Gamma Communications PLC |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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