Correlation Between Biotechnology Fund and Northern Small
Can any of the company-specific risk be diversified away by investing in both Biotechnology Fund and Northern Small 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 Northern Small 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 Northern Small Cap, you can compare the effects of market volatilities on Biotechnology Fund and Northern Small 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 Northern Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Fund and Northern Small.
Diversification Opportunities for Biotechnology Fund and Northern Small
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BIOTECHNOLOGY and Northern is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Northern Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Small Cap 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 Northern Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Small Cap has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Northern Small go up and down completely randomly.
Pair Corralation between Biotechnology Fund and Northern Small
Assuming the 90 days horizon Biotechnology Fund Class is expected to under-perform the Northern Small. In addition to that, Biotechnology Fund is 1.91 times more volatile than Northern Small Cap. It trades about -0.05 of its total potential returns per unit of risk. Northern Small Cap is currently generating about -0.02 per unit of volatility. If you would invest 1,449 in Northern Small Cap on October 18, 2024 and sell it today you would lose (63.00) from holding Northern Small Cap or give up 4.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Biotechnology Fund Class vs. Northern Small Cap
Performance |
| Timeline |
| Biotechnology Fund Class |
| Northern Small Cap |
Biotechnology Fund and Northern Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotechnology Fund and Northern Small
The main advantage of trading using opposite Biotechnology Fund and Northern Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Fund position performs unexpectedly, Northern Small 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 Northern Small will offset losses from the drop in Northern Small's long position.| Biotechnology Fund vs. Lord Abbett Health | Biotechnology Fund vs. The Hartford Healthcare | Biotechnology Fund vs. Invesco Global Health | Biotechnology Fund vs. Fidelity Advisor Health |
| Northern Small vs. Invesco Technology Fund | Northern Small vs. Biotechnology Fund Class | Northern Small vs. Pgim Jennison Technology | Northern Small vs. Technology Ultrasector Profund |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |