Correlation Between International Biotechnology and Elmos Semiconductor
Can any of the company-specific risk be diversified away by investing in both International Biotechnology and Elmos Semiconductor 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 Elmos Semiconductor 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 Elmos Semiconductor SE, you can compare the effects of market volatilities on International Biotechnology and Elmos Semiconductor 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 Elmos Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Biotechnology and Elmos Semiconductor.
Diversification Opportunities for International Biotechnology and Elmos Semiconductor
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between International and Elmos is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding International Biotechnology Tr and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor 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 Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of International Biotechnology i.e., International Biotechnology and Elmos Semiconductor go up and down completely randomly.
Pair Corralation between International Biotechnology and Elmos Semiconductor
Assuming the 90 days trading horizon International Biotechnology Trust is expected to generate 0.34 times more return on investment than Elmos Semiconductor. However, International Biotechnology Trust is 2.92 times less risky than Elmos Semiconductor. It trades about -0.12 of its potential returns per unit of risk. Elmos Semiconductor SE is currently generating about -0.07 per unit of risk. If you would invest 71,200 in International Biotechnology Trust on November 28, 2024 and sell it today you would lose (2,000) from holding International Biotechnology Trust or give up 2.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Biotechnology Tr vs. Elmos Semiconductor SE
Performance |
| Timeline |
| International Biotechnology |
| Elmos Semiconductor |
International Biotechnology and Elmos Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Biotechnology and Elmos Semiconductor
The main advantage of trading using opposite International Biotechnology and Elmos Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Biotechnology position performs unexpectedly, Elmos Semiconductor 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 Elmos Semiconductor will offset losses from the drop in Elmos Semiconductor's long position.The idea behind International Biotechnology Trust and Elmos Semiconductor SE 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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