Correlation Between International Biotechnology and Solid State

Can any of the company-specific risk be diversified away by investing in both International Biotechnology and Solid State 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 Solid State 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 Solid State Plc, you can compare the effects of market volatilities on International Biotechnology and Solid State 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 Solid State. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Biotechnology and Solid State.

Diversification Opportunities for International Biotechnology and Solid State

-0.33

Correlation Coefficient

International Biotechnology  Solid State

Very good diversification

The 3 months correlation between International and Solid is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding International Biotechnology Tr and Solid State Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid State Plc 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 Solid State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid State Plc has no effect on the direction of International Biotechnology i.e., International Biotechnology and Solid State go up and down completely randomly.

Pair Corralation between International Biotechnology and Solid State

Assuming the 90 days trading horizon International Biotechnology is expected to generate 37.55 times less return on investment than Solid State. But when comparing it to its historical volatility, International Biotechnology Trust is 2.43 times less risky than Solid State. It trades about 0.03 of its potential returns per unit of risk. Solid State Plc is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  13,000  in Solid State Plc on October 11, 2024 and sell it today you would earn a total of  3,300  from holding Solid State Plc or generate 25.38% return on investment over 90 days.

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

International Biotechnology Tr  vs.  Solid State Plc

International Biotechnology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Biotechnology Trust are ranked lower than 5 (%) 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.

Solid State Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid State Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with International Biotechnology and Solid State

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

The idea behind International Biotechnology Trust and Solid State Plc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.