Correlation Between Basic Materials and Biotechnology Fund
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Biotechnology Fund 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 Basic Materials and Biotechnology Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials Fund and Biotechnology Fund Class, you can compare the effects of market volatilities on Basic Materials and Biotechnology Fund 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 Basic Materials with a short position of Biotechnology Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Biotechnology Fund.
Diversification Opportunities for Basic Materials and Biotechnology Fund
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Basic and Biotechnology is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials Fund and Biotechnology Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Fund Class and Basic Materials 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 Basic Materials Fund are associated (or correlated) with Biotechnology Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Fund Class has no effect on the direction of Basic Materials i.e., Basic Materials and Biotechnology Fund go up and down completely randomly.
Pair Corralation between Basic Materials and Biotechnology Fund
Assuming the 90 days horizon Basic Materials is expected to generate 1.16 times less return on investment than Biotechnology Fund. But when comparing it to its historical volatility, Basic Materials Fund is 1.06 times less risky than Biotechnology Fund. It trades about 0.05 of its potential returns per unit of risk. Biotechnology Fund Class is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,793 in Biotechnology Fund Class on August 27, 2024 and sell it today you would earn a total of 901.00 from holding Biotechnology Fund Class or generate 15.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Basic Materials Fund vs. Biotechnology Fund Class
Performance |
| Timeline |
| Basic Materials |
| Biotechnology Fund Class |
Basic Materials and Biotechnology Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basic Materials and Biotechnology Fund
The main advantage of trading using opposite Basic Materials and Biotechnology Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Biotechnology Fund 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 Biotechnology Fund will offset losses from the drop in Biotechnology Fund's long position.| Basic Materials vs. Basic Materials Fund | Basic Materials vs. Energy Services Fund | Basic Materials vs. Energy Fund Class | Basic Materials vs. Basic Materials Fund |
| Biotechnology Fund vs. Basic Materials Fund | Biotechnology Fund vs. Basic Materials Fund | Biotechnology Fund vs. Banking Fund Class | Biotechnology Fund vs. Basic Materials Fund |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |