Correlation Between Biotechnology Ultrasector and Gmo Asset

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

By analyzing existing cross correlation between Biotechnology Ultrasector Profund and Gmo Asset Allocation, you can compare the effects of market volatilities on Biotechnology Ultrasector and Gmo Asset 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 Ultrasector with a short position of Gmo Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Ultrasector and Gmo Asset.

Diversification Opportunities for Biotechnology Ultrasector and Gmo Asset

0.32

Correlation Coefficient

Biotechnology Ultrasector  Gmo Asset

Weak diversification

The 3 months correlation between Biotechnology and Gmo is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Ultrasector Prof and Gmo Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Asset Allocation and Biotechnology Ultrasector 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 Ultrasector Profund are associated (or correlated) with Gmo Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Asset Allocation has no effect on the direction of Biotechnology Ultrasector i.e., Biotechnology Ultrasector and Gmo Asset go up and down completely randomly.

Pair Corralation between Biotechnology Ultrasector and Gmo Asset

Assuming the 90 days horizon Biotechnology Ultrasector Profund is expected to generate 2.16 times more return on investment than Gmo Asset. However, Biotechnology Ultrasector is 2.16 times more volatile than Gmo Asset Allocation. It trades about 0.01 of its potential returns per unit of risk. Gmo Asset Allocation is currently generating about -0.13 per unit of risk. If you would invest  6,828  in Biotechnology Ultrasector Profund on September 4, 2024 and sell it today you would lose (13.00) from holding Biotechnology Ultrasector Profund or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Biotechnology Ultrasector Prof  vs.  Gmo Asset Allocation

Biotechnology Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biotechnology Ultrasector Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Biotechnology Ultrasector is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Asset Allocation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Asset Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Biotechnology Ultrasector and Gmo Asset

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

The idea behind Biotechnology Ultrasector Profund and Gmo Asset Allocation 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.