Correlation Between Health Biotchnology and Foreign Bond
Can any of the company-specific risk be diversified away by investing in both Health Biotchnology and Foreign Bond 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 Foreign Bond 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 Foreign Bond Fund, you can compare the effects of market volatilities on Health Biotchnology and Foreign Bond 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 Foreign Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Biotchnology and Foreign Bond.
Diversification Opportunities for Health Biotchnology and Foreign Bond
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Health and Foreign is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio and Foreign Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Bond 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 Foreign Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Bond has no effect on the direction of Health Biotchnology i.e., Health Biotchnology and Foreign Bond go up and down completely randomly.
Pair Corralation between Health Biotchnology and Foreign Bond
Assuming the 90 days horizon Health Biotchnology Portfolio is expected to under-perform the Foreign Bond. In addition to that, Health Biotchnology is 2.06 times more volatile than Foreign Bond Fund. It trades about -0.04 of its total potential returns per unit of risk. Foreign Bond Fund is currently generating about 0.21 per unit of volatility. If you would invest 741.00 in Foreign Bond Fund on November 28, 2024 and sell it today you would earn a total of 12.00 from holding Foreign Bond Fund or generate 1.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Biotchnology Portfolio vs. Foreign Bond Fund
Performance |
| Timeline |
| Health Biotchnology |
| Foreign Bond |
Health Biotchnology and Foreign Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Biotchnology and Foreign Bond
The main advantage of trading using opposite Health Biotchnology and Foreign Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Biotchnology position performs unexpectedly, Foreign Bond 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 Foreign Bond will offset losses from the drop in Foreign Bond's long position.| Health Biotchnology vs. Pnc Emerging Markets | Health Biotchnology vs. Investec Emerging Markets | Health Biotchnology vs. Dws Emerging Markets | Health Biotchnology vs. Ep Emerging Markets |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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