Correlation Between United Parcel and International Biotechnology

Can any of the company-specific risk be diversified away by investing in both United Parcel 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 Parcel 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 Parcel Service and International Biotechnology Trust, you can compare the effects of market volatilities on United Parcel 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 Parcel with a short position of International Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and International Biotechnology.

Diversification Opportunities for United Parcel and International Biotechnology

-0.35

Correlation Coefficient

United Parcel  International Biotechnology

Very good diversification

The 3 months correlation between United and International is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service 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 Parcel 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 Parcel Service 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 Parcel i.e., United Parcel and International Biotechnology go up and down completely randomly.

Pair Corralation between United Parcel and International Biotechnology

Assuming the 90 days trading horizon United Parcel Service is expected to under-perform the International Biotechnology. But the stock apears to be less risky and, when comparing its historical volatility, United Parcel Service is 1.03 times less risky than International Biotechnology. The stock trades about -0.1 of its potential returns per unit of risk. The International Biotechnology Trust is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  68,853  in International Biotechnology Trust on October 9, 2024 and sell it today you would earn a total of  147.00  from holding International Biotechnology Trust or generate 0.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

United Parcel Service  vs.  International Biotechnology Tr

United Parcel Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

International Biotechnology

Risk-Adjusted Performance

4 of 100

Insignificant

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 Parcel and International Biotechnology

The main advantage of trading using opposite United Parcel and International Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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 Parcel Service 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.