Correlation Between Alphacentric Lifesci and International Equity

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

By analyzing existing cross correlation between Alphacentric Lifesci Healthcare and International Equity Fund, you can compare the effects of market volatilities on Alphacentric Lifesci and International Equity 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 Alphacentric Lifesci with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphacentric Lifesci and International Equity.

Diversification Opportunities for Alphacentric Lifesci and International Equity

0.65

Correlation Coefficient

Alphacentric Lifesci  International Equity

Poor diversification

The 3 months correlation between Alphacentric and International is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alphacentric Lifesci Healthcar and International Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Alphacentric Lifesci 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 Alphacentric Lifesci Healthcare are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Alphacentric Lifesci i.e., Alphacentric Lifesci and International Equity go up and down completely randomly.

Pair Corralation between Alphacentric Lifesci and International Equity

Assuming the 90 days horizon Alphacentric Lifesci Healthcare is expected to generate 0.91 times more return on investment than International Equity. However, Alphacentric Lifesci Healthcare is 1.09 times less risky than International Equity. It trades about -0.13 of its potential returns per unit of risk. International Equity Fund is currently generating about -0.22 per unit of risk. If you would invest  1,347  in Alphacentric Lifesci Healthcare on October 3, 2024 and sell it today you would lose (94.00) from holding Alphacentric Lifesci Healthcare or give up 6.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Alphacentric Lifesci Healthcar  vs.  International Equity Fund

Alphacentric Lifesci

Risk-Adjusted Performance

0 of 100

Very Weak

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

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Alphacentric Lifesci and International Equity

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

The idea behind Alphacentric Lifesci Healthcare and International Equity Fund 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.