Correlation Between Salient Alternative and Biotechnology Ultrasector

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

By analyzing existing cross correlation between Salient Alternative Beta and Biotechnology Ultrasector Profund, you can compare the effects of market volatilities on Salient Alternative and Biotechnology Ultrasector 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 Salient Alternative with a short position of Biotechnology Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salient Alternative and Biotechnology Ultrasector.

Diversification Opportunities for Salient Alternative and Biotechnology Ultrasector

0.59

Correlation Coefficient

Salient Alternative  Biotechnology Ultrasector

Very weak diversification

The 3 months correlation between Salient and Biotechnology is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Salient Alternative Beta and Biotechnology Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Ultrasector and Salient Alternative 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 Salient Alternative Beta are associated (or correlated) with Biotechnology Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Ultrasector has no effect on the direction of Salient Alternative i.e., Salient Alternative and Biotechnology Ultrasector go up and down completely randomly.

Pair Corralation between Salient Alternative and Biotechnology Ultrasector

Assuming the 90 days horizon Salient Alternative Beta is expected to generate 0.19 times more return on investment than Biotechnology Ultrasector. However, Salient Alternative Beta is 5.18 times less risky than Biotechnology Ultrasector. It trades about -0.1 of its potential returns per unit of risk. Biotechnology Ultrasector Profund is currently generating about -0.16 per unit of risk. If you would invest  1,234  in Salient Alternative Beta on December 3, 2024 and sell it today you would lose (53.00) from holding Salient Alternative Beta or give up 4.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Salient Alternative Beta  vs.  Biotechnology Ultrasector Prof

Salient Alternative Beta

Risk-Adjusted Performance

Very Weak

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

Biotechnology Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biotechnology Ultrasector Profund 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 forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Salient Alternative and Biotechnology Ultrasector

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

The idea behind Salient Alternative Beta and Biotechnology Ultrasector Profund 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 Anywhere module to track or share privately all of your investments from the convenience of any device.