Correlation Between Health Biotchnology and K2 Alternative
Can any of the company-specific risk be diversified away by investing in both Health Biotchnology and K2 Alternative 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 Health Biotchnology and K2 Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Biotchnology Portfolio and K2 Alternative Strategies, you can compare the effects of market volatilities on Health Biotchnology and K2 Alternative 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 Health Biotchnology with a short position of K2 Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Biotchnology and K2 Alternative.
Diversification Opportunities for Health Biotchnology and K2 Alternative
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Health and FSKKX is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio and K2 Alternative Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K2 Alternative Strategies and Health Biotchnology 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 Health Biotchnology Portfolio are associated (or correlated) with K2 Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K2 Alternative Strategies has no effect on the direction of Health Biotchnology i.e., Health Biotchnology and K2 Alternative go up and down completely randomly.
Pair Corralation between Health Biotchnology and K2 Alternative
Assuming the 90 days horizon Health Biotchnology Portfolio is expected to generate 3.25 times more return on investment than K2 Alternative. However, Health Biotchnology is 3.25 times more volatile than K2 Alternative Strategies. It trades about 0.07 of its potential returns per unit of risk. K2 Alternative Strategies is currently generating about 0.2 per unit of risk. If you would invest 2,211 in Health Biotchnology Portfolio on September 4, 2024 and sell it today you would earn a total of 254.00 from holding Health Biotchnology Portfolio or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Biotchnology Portfolio vs. K2 Alternative Strategies
Performance |
| Timeline |
| Health Biotchnology |
| K2 Alternative Strategies |
Health Biotchnology and K2 Alternative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Biotchnology and K2 Alternative
The main advantage of trading using opposite Health Biotchnology and K2 Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Biotchnology position performs unexpectedly, K2 Alternative 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 K2 Alternative will offset losses from the drop in K2 Alternative's long position.The idea behind Health Biotchnology Portfolio and K2 Alternative Strategies 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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