Correlation Between International Biotechnology and Veolia Environnement
Can any of the company-specific risk be diversified away by investing in both International Biotechnology and Veolia Environnement 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 Veolia Environnement 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 Veolia Environnement VE, you can compare the effects of market volatilities on International Biotechnology and Veolia Environnement 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 Veolia Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Biotechnology and Veolia Environnement.
Diversification Opportunities for International Biotechnology and Veolia Environnement
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Veolia is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding International Biotechnology Tr and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement 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 Veolia Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veolia Environnement has no effect on the direction of International Biotechnology i.e., International Biotechnology and Veolia Environnement go up and down completely randomly.
Pair Corralation between International Biotechnology and Veolia Environnement
Assuming the 90 days trading horizon International Biotechnology Trust is expected to under-perform the Veolia Environnement. In addition to that, International Biotechnology is 1.16 times more volatile than Veolia Environnement VE. It trades about -0.1 of its total potential returns per unit of risk. Veolia Environnement VE is currently generating about -0.1 per unit of volatility. If you would invest 2,889 in Veolia Environnement VE on September 12, 2024 and sell it today you would lose (78.00) from holding Veolia Environnement VE or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Biotechnology Tr vs. Veolia Environnement VE
Performance |
| Timeline |
| International Biotechnology |
| Veolia Environnement |
International Biotechnology and Veolia Environnement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Biotechnology and Veolia Environnement
The main advantage of trading using opposite International Biotechnology and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Biotechnology position performs unexpectedly, Veolia Environnement 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 Veolia Environnement will offset losses from the drop in Veolia Environnement's long position.The idea behind International Biotechnology Trust and Veolia Environnement VE 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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