Correlation Between United States and International Biotechnology

Can any of the company-specific risk be diversified away by investing in both United States and International Biotechnology 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 United States and International Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United States Steel and International Biotechnology Trust, you can compare the effects of market volatilities on United States and International Biotechnology 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 United States with a short position of International Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and International Biotechnology.

Diversification Opportunities for United States and International Biotechnology

-0.09

Correlation Coefficient

United States  International Biotechnology

Good diversification

The 3 months correlation between United and International is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and International Biotechnology Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Biotechnology and United States 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 United States Steel are associated (or correlated) with International Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Biotechnology has no effect on the direction of United States i.e., United States and International Biotechnology go up and down completely randomly.

Pair Corralation between United States and International Biotechnology

Assuming the 90 days trading horizon United States is expected to generate 11.73 times less return on investment than International Biotechnology. In addition to that, United States is 2.75 times more volatile than International Biotechnology Trust. It trades about 0.0 of its total potential returns per unit of risk. International Biotechnology Trust is currently generating about 0.06 per unit of volatility. If you would invest  56,947  in International Biotechnology Trust on October 3, 2024 and sell it today you would earn a total of  11,253  from holding International Biotechnology Trust or generate 19.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United States Steel  vs.  International Biotechnology Tr

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

International Biotechnology

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Biotechnology Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, International Biotechnology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with United States and International Biotechnology

The main advantage of trading using opposite United States and International Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, International Biotechnology 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 International Biotechnology will offset losses from the drop in International Biotechnology's long position.

The idea behind United States Steel and International Biotechnology Trust 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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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.