Correlation Between Biotechnology Fund and Guidemark(r) Core
Can any of the company-specific risk be diversified away by investing in both Biotechnology Fund and Guidemark(r) Core 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 Biotechnology Fund and Guidemark(r) Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biotechnology Fund Class and Guidemark E Fixed, you can compare the effects of market volatilities on Biotechnology Fund and Guidemark(r) Core 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 Biotechnology Fund with a short position of Guidemark(r) Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Fund and Guidemark(r) Core.
Diversification Opportunities for Biotechnology Fund and Guidemark(r) Core
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Biotechnology and Guidemark(r) is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Guidemark E Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark E Fixed and Biotechnology Fund 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 Biotechnology Fund Class are associated (or correlated) with Guidemark(r) Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark E Fixed has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Guidemark(r) Core go up and down completely randomly.
Pair Corralation between Biotechnology Fund and Guidemark(r) Core
Assuming the 90 days horizon Biotechnology Fund Class is expected to under-perform the Guidemark(r) Core. In addition to that, Biotechnology Fund is 5.82 times more volatile than Guidemark E Fixed. It trades about -0.09 of its total potential returns per unit of risk. Guidemark E Fixed is currently generating about 0.01 per unit of volatility. If you would invest 809.00 in Guidemark E Fixed on October 26, 2024 and sell it today you would earn a total of 2.00 from holding Guidemark E Fixed or generate 0.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biotechnology Fund Class vs. Guidemark E Fixed
Performance |
| Timeline |
| Biotechnology Fund Class |
| Guidemark E Fixed |
Biotechnology Fund and Guidemark(r) Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotechnology Fund and Guidemark(r) Core
The main advantage of trading using opposite Biotechnology Fund and Guidemark(r) Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Fund position performs unexpectedly, Guidemark(r) Core 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 Guidemark(r) Core will offset losses from the drop in Guidemark(r) Core's long position.The idea behind Biotechnology Fund Class and Guidemark E Fixed 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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