Correlation Between International Biotechnology and CAP LEASE
Can any of the company-specific risk be diversified away by investing in both International Biotechnology and CAP LEASE 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 CAP LEASE 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 CAP LEASE AVIATION, you can compare the effects of market volatilities on International Biotechnology and CAP LEASE 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 CAP LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Biotechnology and CAP LEASE.
Diversification Opportunities for International Biotechnology and CAP LEASE
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and CAP is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding International Biotechnology Tr and CAP LEASE AVIATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP LEASE AVIATION 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 CAP LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP LEASE AVIATION has no effect on the direction of International Biotechnology i.e., International Biotechnology and CAP LEASE go up and down completely randomly.
Pair Corralation between International Biotechnology and CAP LEASE
Assuming the 90 days trading horizon International Biotechnology Trust is expected to generate 0.5 times more return on investment than CAP LEASE. However, International Biotechnology Trust is 1.98 times less risky than CAP LEASE. It trades about 0.04 of its potential returns per unit of risk. CAP LEASE AVIATION is currently generating about -0.02 per unit of risk. If you would invest 62,450 in International Biotechnology Trust on October 10, 2024 and sell it today you would earn a total of 7,350 from holding International Biotechnology Trust or generate 11.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Biotechnology Tr vs. CAP LEASE AVIATION
Performance |
| Timeline |
| International Biotechnology |
| CAP LEASE AVIATION |
International Biotechnology and CAP LEASE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Biotechnology and CAP LEASE
The main advantage of trading using opposite International Biotechnology and CAP LEASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Biotechnology position performs unexpectedly, CAP LEASE 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 CAP LEASE will offset losses from the drop in CAP LEASE's long position.The idea behind International Biotechnology Trust and CAP LEASE AVIATION 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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