Correlation Between Global Alpha and Health Biotchnology
Can any of the company-specific risk be diversified away by investing in both Global Alpha and Health Biotchnology 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 Global Alpha and Health Biotchnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Global Alpha and Health Biotchnology Portfolio, you can compare the effects of market volatilities on Global Alpha and Health Biotchnology 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 Global Alpha with a short position of Health Biotchnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Alpha and Health Biotchnology.
Diversification Opportunities for Global Alpha and Health Biotchnology
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Global and Health is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding The Global Alpha and Health Biotchnology Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Biotchnology and Global Alpha 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 The Global Alpha are associated (or correlated) with Health Biotchnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Biotchnology has no effect on the direction of Global Alpha i.e., Global Alpha and Health Biotchnology go up and down completely randomly.
Pair Corralation between Global Alpha and Health Biotchnology
Assuming the 90 days horizon The Global Alpha is expected to generate 1.32 times more return on investment than Health Biotchnology. However, Global Alpha is 1.32 times more volatile than Health Biotchnology Portfolio. It trades about 0.06 of its potential returns per unit of risk. Health Biotchnology Portfolio is currently generating about -0.4 per unit of risk. If you would invest 1,852 in The Global Alpha on September 12, 2024 and sell it today you would earn a total of 27.00 from holding The Global Alpha or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Global Alpha vs. Health Biotchnology Portfolio
Performance |
| Timeline |
| Global Alpha |
| Health Biotchnology |
Global Alpha and Health Biotchnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Alpha and Health Biotchnology
The main advantage of trading using opposite Global Alpha and Health Biotchnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Alpha position performs unexpectedly, Health Biotchnology 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 Biotchnology will offset losses from the drop in Health Biotchnology's long position.| Global Alpha vs. American Funds New | Global Alpha vs. American Funds New | Global Alpha vs. New Perspective Fund | Global Alpha vs. New Perspective Fund |
| Health Biotchnology vs. Blackrock High Yield | Health Biotchnology vs. Artisan High Income | Health Biotchnology vs. Buffalo High Yield | Health Biotchnology vs. Prudential High Yield |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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