Correlation Between Biotechnology Fund and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Biotechnology Fund and Inverse Nasdaq-100 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 Inverse Nasdaq-100 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 Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Biotechnology Fund and Inverse Nasdaq-100 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 Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Fund and Inverse Nasdaq-100.
Diversification Opportunities for Biotechnology Fund and Inverse Nasdaq-100
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Biotechnology and Inverse is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 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 Inverse Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Biotechnology Fund and Inverse Nasdaq-100
Assuming the 90 days horizon Biotechnology Fund Class is expected to generate 1.49 times more return on investment than Inverse Nasdaq-100. However, Biotechnology Fund is 1.49 times more volatile than Inverse Nasdaq 100 Strategy. It trades about 0.0 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about -0.18 per unit of risk. If you would invest 6,917 in Biotechnology Fund Class on September 2, 2024 and sell it today you would lose (21.00) from holding Biotechnology Fund Class or give up 0.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biotechnology Fund Class vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Biotechnology Fund Class |
| Inverse Nasdaq 100 |
Biotechnology Fund and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotechnology Fund and Inverse Nasdaq-100
The main advantage of trading using opposite Biotechnology Fund and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Fund position performs unexpectedly, Inverse Nasdaq-100 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 Inverse Nasdaq-100 will offset losses from the drop in Inverse Nasdaq-100's long position.| Biotechnology Fund vs. Baron Health Care | Biotechnology Fund vs. Alger Health Sciences | Biotechnology Fund vs. The Hartford Healthcare | Biotechnology Fund vs. Allianzgi Health Sciences |
| Inverse Nasdaq-100 vs. Victory Strategic Allocation | Inverse Nasdaq-100 vs. T Rowe Price | Inverse Nasdaq-100 vs. Alternative Asset Allocation | Inverse Nasdaq-100 vs. T Rowe Price |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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