Correlation Between International Biotechnology and CompuGroup Medical
Can any of the company-specific risk be diversified away by investing in both International Biotechnology and CompuGroup Medical 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 International Biotechnology and CompuGroup Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Biotechnology Trust and CompuGroup Medical AG, you can compare the effects of market volatilities on International Biotechnology and CompuGroup Medical 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 International Biotechnology with a short position of CompuGroup Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Biotechnology and CompuGroup Medical.
Diversification Opportunities for International Biotechnology and CompuGroup Medical
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and CompuGroup is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding International Biotechnology Tr and CompuGroup Medical AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompuGroup Medical and International Biotechnology 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 International Biotechnology Trust are associated (or correlated) with CompuGroup Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompuGroup Medical has no effect on the direction of International Biotechnology i.e., International Biotechnology and CompuGroup Medical go up and down completely randomly.
Pair Corralation between International Biotechnology and CompuGroup Medical
Assuming the 90 days trading horizon International Biotechnology Trust is expected to generate 0.31 times more return on investment than CompuGroup Medical. However, International Biotechnology Trust is 3.2 times less risky than CompuGroup Medical. It trades about 0.08 of its potential returns per unit of risk. CompuGroup Medical AG is currently generating about -0.05 per unit of risk. If you would invest 55,162 in International Biotechnology Trust on September 15, 2024 and sell it today you would earn a total of 15,438 from holding International Biotechnology Trust or generate 27.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Biotechnology Tr vs. CompuGroup Medical AG
Performance |
| Timeline |
| International Biotechnology |
| CompuGroup Medical |
International Biotechnology and CompuGroup Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Biotechnology and CompuGroup Medical
The main advantage of trading using opposite International Biotechnology and CompuGroup Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Biotechnology position performs unexpectedly, CompuGroup Medical 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 CompuGroup Medical will offset losses from the drop in CompuGroup Medical's long position.The idea behind International Biotechnology Trust and CompuGroup Medical AG 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.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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