Correlation Between International Biotechnology and Verizon Communications

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Can any of the company-specific risk be diversified away by investing in both International Biotechnology and Verizon Communications 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 International Biotechnology and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Biotechnology Trust and Verizon Communications, you can compare the effects of market volatilities on International Biotechnology and Verizon Communications 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 International Biotechnology with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Biotechnology and Verizon Communications.

Diversification Opportunities for International Biotechnology and Verizon Communications

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between International and Verizon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding International Biotechnology Tr and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and International Biotechnology 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 International Biotechnology Trust are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of International Biotechnology i.e., International Biotechnology and Verizon Communications go up and down completely randomly.

Pair Corralation between International Biotechnology and Verizon Communications

Assuming the 90 days trading horizon International Biotechnology Trust is expected to generate 0.88 times more return on investment than Verizon Communications. However, International Biotechnology Trust is 1.13 times less risky than Verizon Communications. It trades about 0.01 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.0 per unit of risk. If you would invest  67,837  in International Biotechnology Trust on October 25, 2024 and sell it today you would earn a total of  3,163  from holding International Biotechnology Trust or generate 4.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

International Biotechnology Tr  vs.  Verizon Communications

 Performance 
       Timeline  
International Biotechnology 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in International Biotechnology Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, International Biotechnology may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Verizon Communications 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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 and Verizon Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Biotechnology and Verizon Communications

The main advantage of trading using opposite International Biotechnology and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Biotechnology position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.
The idea behind International Biotechnology Trust and Verizon Communications 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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