Correlation Between Biotechnology Ultrasector and Mainstay Epoch
Can any of the company-specific risk be diversified away by investing in both Biotechnology Ultrasector and Mainstay Epoch 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 Biotechnology Ultrasector and Mainstay Epoch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biotechnology Ultrasector Profund and Mainstay Epoch Small, you can compare the effects of market volatilities on Biotechnology Ultrasector and Mainstay Epoch 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 Biotechnology Ultrasector with a short position of Mainstay Epoch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Ultrasector and Mainstay Epoch.
Diversification Opportunities for Biotechnology Ultrasector and Mainstay Epoch
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Biotechnology and Mainstay is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Ultrasector Prof and Mainstay Epoch Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Epoch Small and Biotechnology Ultrasector 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 Biotechnology Ultrasector Profund are associated (or correlated) with Mainstay Epoch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Epoch Small has no effect on the direction of Biotechnology Ultrasector i.e., Biotechnology Ultrasector and Mainstay Epoch go up and down completely randomly.
Pair Corralation between Biotechnology Ultrasector and Mainstay Epoch
Assuming the 90 days horizon Biotechnology Ultrasector Profund is expected to generate 2.1 times more return on investment than Mainstay Epoch. However, Biotechnology Ultrasector is 2.1 times more volatile than Mainstay Epoch Small. It trades about 0.05 of its potential returns per unit of risk. Mainstay Epoch Small is currently generating about 0.09 per unit of risk. If you would invest 4,784 in Biotechnology Ultrasector Profund on August 25, 2024 and sell it today you would earn a total of 1,728 from holding Biotechnology Ultrasector Profund or generate 36.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biotechnology Ultrasector Prof vs. Mainstay Epoch Small
Performance |
| Timeline |
| Biotechnology Ultrasector |
| Mainstay Epoch Small |
Biotechnology Ultrasector and Mainstay Epoch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotechnology Ultrasector and Mainstay Epoch
The main advantage of trading using opposite Biotechnology Ultrasector and Mainstay Epoch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Ultrasector position performs unexpectedly, Mainstay Epoch 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 Mainstay Epoch will offset losses from the drop in Mainstay Epoch's long position.The idea behind Biotechnology Ultrasector Profund and Mainstay Epoch Small 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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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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