Correlation Between Biotechnology Fund and Evexx

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

Diversification Opportunities for Biotechnology Fund and Evexx

0.49

Correlation Coefficient

Biotechnology Fund  Evexx

Very weak diversification

The 3 months correlation between Biotechnology and Evexx is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Evexx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evexx 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 Evexx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evexx has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Evexx go up and down completely randomly.

Pair Corralation between Biotechnology Fund and Evexx

Assuming the 90 days horizon Biotechnology Fund is expected to generate 178.81 times less return on investment than Evexx. But when comparing it to its historical volatility, Biotechnology Fund Class is 88.65 times less risky than Evexx. It trades about 0.09 of its potential returns per unit of risk. Evexx is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  433.00  in Evexx on October 27, 2024 and sell it today you would lose (333.00) from holding Evexx or give up 76.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Biotechnology Fund Class  vs.  Evexx

Biotechnology Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biotechnology Fund Class 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.

Evexx

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evexx are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Evexx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biotechnology Fund and Evexx

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

The idea behind Biotechnology Fund Class and Evexx 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..