Correlation Between Biotechnology Fund and Astor Star

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

By analyzing existing cross correlation between Biotechnology Fund Class and Astor Star Fund, you can compare the effects of market volatilities on Biotechnology Fund and Astor Star 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 Fund with a short position of Astor Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Fund and Astor Star.

Diversification Opportunities for Biotechnology Fund and Astor Star

0.28

Correlation Coefficient

Biotechnology Fund  Astor Star

Modest diversification

The 3 months correlation between Biotechnology and Astor is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Astor Star Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astor Star Fund and Biotechnology Fund 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 Fund Class are associated (or correlated) with Astor Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astor Star Fund has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Astor Star go up and down completely randomly.

Pair Corralation between Biotechnology Fund and Astor Star

Assuming the 90 days horizon Biotechnology Fund Class is expected to generate 1.26 times more return on investment than Astor Star. However, Biotechnology Fund is 1.26 times more volatile than Astor Star Fund. It trades about 0.04 of its potential returns per unit of risk. Astor Star Fund is currently generating about -0.08 per unit of risk. If you would invest  5,545  in Biotechnology Fund Class on December 22, 2024 and sell it today you would earn a total of  120.00  from holding Biotechnology Fund Class or generate 2.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Biotechnology Fund Class  vs.  Astor Star Fund

Biotechnology Fund Class

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Biotechnology Fund Class are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Biotechnology Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Astor Star Fund

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Biotechnology Fund and Astor Star

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

The idea behind Biotechnology Fund Class and Astor Star 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.