Correlation Between Biotechnology Fund and Strengthening Dollar
Can any of the company-specific risk be diversified away by investing in both Biotechnology Fund and Strengthening Dollar 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 Strengthening Dollar 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 Strengthening Dollar 2x, you can compare the effects of market volatilities on Biotechnology Fund and Strengthening Dollar 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 Strengthening Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Fund and Strengthening Dollar.
Diversification Opportunities for Biotechnology Fund and Strengthening Dollar
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Biotechnology and Strengthening is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Strengthening Dollar 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strengthening Dollar 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 Strengthening Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strengthening Dollar has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Strengthening Dollar go up and down completely randomly.
Pair Corralation between Biotechnology Fund and Strengthening Dollar
Assuming the 90 days horizon Biotechnology Fund Class is expected to under-perform the Strengthening Dollar. In addition to that, Biotechnology Fund is 1.47 times more volatile than Strengthening Dollar 2x. It trades about -0.02 of its total potential returns per unit of risk. Strengthening Dollar 2x is currently generating about 0.25 per unit of volatility. If you would invest 6,465 in Strengthening Dollar 2x on August 28, 2024 and sell it today you would earn a total of 350.00 from holding Strengthening Dollar 2x or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biotechnology Fund Class vs. Strengthening Dollar 2x
Performance |
| Timeline |
| Biotechnology Fund Class |
| Strengthening Dollar |
Biotechnology Fund and Strengthening Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotechnology Fund and Strengthening Dollar
The main advantage of trading using opposite Biotechnology Fund and Strengthening Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Fund position performs unexpectedly, Strengthening Dollar 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 Strengthening Dollar will offset losses from the drop in Strengthening Dollar'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 |
| Strengthening Dollar vs. Basic Materials Fund | Strengthening Dollar vs. Basic Materials Fund | Strengthening Dollar vs. Banking Fund Class | Strengthening Dollar 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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