Correlation Between International Business and VanEck Biotech
Can any of the company-specific risk be diversified away by investing in both International Business and VanEck Biotech 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 International Business and VanEck Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and VanEck Biotech ETF, you can compare the effects of market volatilities on International Business and VanEck Biotech 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 International Business with a short position of VanEck Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and VanEck Biotech.
Diversification Opportunities for International Business and VanEck Biotech
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between International and VanEck is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and VanEck Biotech ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Biotech ETF and International Business 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 International Business Machines are associated (or correlated) with VanEck Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Biotech ETF has no effect on the direction of International Business i.e., International Business and VanEck Biotech go up and down completely randomly.
Pair Corralation between International Business and VanEck Biotech
Considering the 90-day investment horizon International Business Machines is expected to generate 1.77 times more return on investment than VanEck Biotech. However, International Business is 1.77 times more volatile than VanEck Biotech ETF. It trades about 0.1 of its potential returns per unit of risk. VanEck Biotech ETF is currently generating about -0.13 per unit of risk. If you would invest 16,533 in International Business Machines on January 18, 2024 and sell it today you would earn a total of 1,777 from holding International Business Machines or generate 10.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. VanEck Biotech ETF
Performance |
| Timeline |
| International Business |
| VanEck Biotech ETF |
International Business and VanEck Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and VanEck Biotech
The main advantage of trading using opposite International Business and VanEck Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, VanEck Biotech 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 VanEck Biotech will offset losses from the drop in VanEck Biotech's long position.| International Business vs. EPAM Systems | International Business vs. Infosys Ltd ADR | International Business vs. Cognizant Technology Solutions | International Business vs. FiscalNote Holdings |
| VanEck Biotech vs. VanEck Pharmaceutical ETF | VanEck Biotech vs. VanEck Retail ETF | VanEck Biotech vs. First Trust NYSE | VanEck Biotech vs. Invesco Dynamic Biotechnology |
Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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