Correlation Between Health Biotchnology and Smead International

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

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

Diversification Opportunities for Health Biotchnology and Smead International

0.19

Correlation Coefficient

Health Biotchnology  Smead International

Average diversification

The 3 months correlation between Health and Smead is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio and Smead International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead International Value and Health Biotchnology 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 Health Biotchnology Portfolio are associated (or correlated) with Smead International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead International Value has no effect on the direction of Health Biotchnology i.e., Health Biotchnology and Smead International go up and down completely randomly.

Pair Corralation between Health Biotchnology and Smead International

Assuming the 90 days horizon Health Biotchnology Portfolio is expected to under-perform the Smead International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Health Biotchnology Portfolio is 1.26 times less risky than Smead International. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Smead International Value is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  5,922  in Smead International Value on September 1, 2024 and sell it today you would lose (206.00) from holding Smead International Value or give up 3.48% of portfolio value over 90 days.

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

Health Biotchnology Portfolio  vs.  Smead International Value

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 fairly strong forward indicators, Health Biotchnology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Smead International Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Health Biotchnology and Smead International

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

The idea behind Health Biotchnology Portfolio and Smead International Value 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.