Correlation Between Biotechnology Fund and Health Care
Can any of the company-specific risk be diversified away by investing in both Biotechnology Fund and Health Care 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 Health Care 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 Health Care Fund, you can compare the effects of market volatilities on Biotechnology Fund and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Fund and Health Care.
Diversification Opportunities for Biotechnology Fund and Health Care
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Biotechnology and HEALTH is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Health Care go up and down completely randomly.
Pair Corralation between Biotechnology Fund and Health Care
Assuming the 90 days horizon Biotechnology Fund is expected to generate 1.33 times less return on investment than Health Care. In addition to that, Biotechnology Fund is 1.68 times more volatile than Health Care Fund. It trades about 0.04 of its total potential returns per unit of risk. Health Care Fund is currently generating about 0.09 per unit of volatility. If you would invest 3,000 in Health Care Fund on September 1, 2024 and sell it today you would earn a total of 51.00 from holding Health Care Fund or generate 1.7% 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. Health Care Fund
Performance |
| Timeline |
| Biotechnology Fund Class |
| Health Care Fund |
Biotechnology Fund and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotechnology Fund and Health Care
The main advantage of trading using opposite Biotechnology Fund and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Fund position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.| Biotechnology Fund vs. Basic Materials Fund | Biotechnology Fund vs. Basic Materials Fund | Biotechnology Fund vs. Banking Fund Class | Biotechnology Fund vs. Basic Materials Fund |
| Health Care vs. Banking Fund Class | Health Care vs. Basic Materials Fund | Health Care vs. Biotechnology Fund Class | Health Care vs. Government Long Bond |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |