Correlation Between Biotechnology Ultrasector and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Biotechnology Ultrasector and Sterling Capital 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 Sterling Capital 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 Sterling Capital Behavioral, you can compare the effects of market volatilities on Biotechnology Ultrasector and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Ultrasector and Sterling Capital.
Diversification Opportunities for Biotechnology Ultrasector and Sterling Capital
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Biotechnology and Sterling is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Ultrasector Prof and Sterling Capital Behavioral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Beh 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Beh has no effect on the direction of Biotechnology Ultrasector i.e., Biotechnology Ultrasector and Sterling Capital go up and down completely randomly.
Pair Corralation between Biotechnology Ultrasector and Sterling Capital
Assuming the 90 days horizon Biotechnology Ultrasector Profund is expected to under-perform the Sterling Capital. In addition to that, Biotechnology Ultrasector is 4.56 times more volatile than Sterling Capital Behavioral. It trades about -0.1 of its total potential returns per unit of risk. Sterling Capital Behavioral is currently generating about 0.17 per unit of volatility. If you would invest 1,002 in Sterling Capital Behavioral on September 13, 2024 and sell it today you would earn a total of 21.00 from holding Sterling Capital Behavioral or generate 2.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biotechnology Ultrasector Prof vs. Sterling Capital Behavioral
Performance |
| Timeline |
| Biotechnology Ultrasector |
| Sterling Capital Beh |
Biotechnology Ultrasector and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotechnology Ultrasector and Sterling Capital
The main advantage of trading using opposite Biotechnology Ultrasector and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Ultrasector position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.The idea behind Biotechnology Ultrasector Profund and Sterling Capital Behavioral 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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