Correlation Between Biotechnology Ultrasector and Nasdaq-100(r)

Can any of the company-specific risk be diversified away by investing in both Biotechnology Ultrasector and Nasdaq-100(r) 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 Ultrasector and Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Biotechnology Ultrasector Profund and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Biotechnology Ultrasector and Nasdaq-100(r) 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 Ultrasector with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Ultrasector and Nasdaq-100(r).

Diversification Opportunities for Biotechnology Ultrasector and Nasdaq-100(r)

-0.07

Correlation Coefficient

Biotechnology Ultrasector  Nasdaq-100(r)

Good diversification

The 3 months correlation between Biotechnology and Nasdaq-100(r) is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Ultrasector Prof and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x and Biotechnology Ultrasector 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 Ultrasector Profund are associated (or correlated) with Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Biotechnology Ultrasector i.e., Biotechnology Ultrasector and Nasdaq-100(r) go up and down completely randomly.

Pair Corralation between Biotechnology Ultrasector and Nasdaq-100(r)

Assuming the 90 days horizon Biotechnology Ultrasector is expected to generate 9.3 times less return on investment than Nasdaq-100(r). In addition to that, Biotechnology Ultrasector is 1.0 times more volatile than Nasdaq 100 2x Strategy. It trades about 0.02 of its total potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.15 per unit of volatility. If you would invest  48,630  in Nasdaq 100 2x Strategy on September 2, 2024 and sell it today you would earn a total of  9,412  from holding Nasdaq 100 2x Strategy or generate 19.35% return on investment over 90 days.

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

Biotechnology Ultrasector Prof  vs.  Nasdaq 100 2x Strategy

Biotechnology Ultrasector

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biotechnology Ultrasector Profund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Biotechnology Ultrasector is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nasdaq 100 2x

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq-100(r) showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biotechnology Ultrasector and Nasdaq-100(r)

The main advantage of trading using opposite Biotechnology Ultrasector and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Ultrasector position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'s long position.

The idea behind Biotechnology Ultrasector Profund and Nasdaq 100 2x Strategy 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..