Correlation Between Us Strategic and Health Biotchnology

Can any of the company-specific risk be diversified away by investing in both Us Strategic and Health Biotchnology 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 Us Strategic and Health Biotchnology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Us Strategic Equity and Health Biotchnology Portfolio, you can compare the effects of market volatilities on Us Strategic and Health Biotchnology 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 Us Strategic with a short position of Health Biotchnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Strategic and Health Biotchnology.

Diversification Opportunities for Us Strategic and Health Biotchnology

-0.51

Correlation Coefficient

Us Strategic  Health Biotchnology

Excellent diversification

The 3 months correlation between RUSTX and Health is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Us Strategic Equity and Health Biotchnology Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Biotchnology and Us Strategic 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 Us Strategic Equity are associated (or correlated) with Health Biotchnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Biotchnology has no effect on the direction of Us Strategic i.e., Us Strategic and Health Biotchnology go up and down completely randomly.

Pair Corralation between Us Strategic and Health Biotchnology

Assuming the 90 days horizon Us Strategic Equity is expected to generate 0.9 times more return on investment than Health Biotchnology. However, Us Strategic Equity is 1.11 times less risky than Health Biotchnology. It trades about 0.17 of its potential returns per unit of risk. Health Biotchnology Portfolio is currently generating about -0.18 per unit of risk. If you would invest  1,747  in Us Strategic Equity on September 18, 2024 and sell it today you would earn a total of  134.00  from holding Us Strategic Equity or generate 7.67% return on investment over 90 days.

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

Us Strategic Equity  vs.  Health Biotchnology Portfolio

Us Strategic Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Strategic Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Strategic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Health Biotchnology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Us Strategic and Health Biotchnology

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

The idea behind Us Strategic Equity and Health Biotchnology Portfolio 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.