Correlation Between IShares Biotechnology and Loncar Cancer

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

By analyzing existing cross correlation between iShares Biotechnology ETF and Loncar Cancer Immunotherapy, you can compare the effects of market volatilities on IShares Biotechnology and Loncar Cancer 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 IShares Biotechnology with a short position of Loncar Cancer. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Biotechnology and Loncar Cancer.

Diversification Opportunities for IShares Biotechnology and Loncar Cancer

0.84

Correlation Coefficient

IShares Biotechnology  Loncar Cancer

Very poor diversification

The 3 months correlation between IShares and Loncar is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Biotechnology ETF and Loncar Cancer Immunotherapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loncar Cancer Immuno and IShares Biotechnology 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 iShares Biotechnology ETF are associated (or correlated) with Loncar Cancer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loncar Cancer Immuno has no effect on the direction of IShares Biotechnology i.e., IShares Biotechnology and Loncar Cancer go up and down completely randomly.

Pair Corralation between IShares Biotechnology and Loncar Cancer

Considering the 90-day investment horizon iShares Biotechnology ETF is expected to generate 0.44 times more return on investment than Loncar Cancer. However, iShares Biotechnology ETF is 2.26 times less risky than Loncar Cancer. It trades about 0.43 of its potential returns per unit of risk. Loncar Cancer Immunotherapy is currently generating about 0.13 per unit of risk. If you would invest  12,611  in iShares Biotechnology ETF on February 22, 2024 and sell it today you would earn a total of  1,140  from holding iShares Biotechnology ETF or generate 9.04% return on investment over 90 days.

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

iShares Biotechnology ETF  vs.  Loncar Cancer Immunotherapy

iShares Biotechnology ETF

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days iShares Biotechnology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, IShares Biotechnology is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Loncar Cancer Immuno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loncar Cancer Immunotherapy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Loncar Cancer is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Biotechnology and Loncar Cancer

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

The idea behind iShares Biotechnology ETF and Loncar Cancer Immunotherapy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.