Correlation Between Celestica and VanEck Biotech

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

By analyzing existing cross correlation between Celestica and VanEck Biotech ETF, you can compare the effects of market volatilities on Celestica 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 Celestica with a short position of VanEck Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Celestica and VanEck Biotech.

Diversification Opportunities for Celestica and VanEck Biotech

-0.29

Correlation Coefficient

Celestica  VanEck Biotech

Very good diversification

The 3 months correlation between Celestica and VanEck is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Celestica 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 Celestica 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 Celestica 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 Celestica i.e., Celestica and VanEck Biotech go up and down completely randomly.

Pair Corralation between Celestica and VanEck Biotech

Considering the 90-day investment horizon Celestica is expected to generate 2.88 times more return on investment than VanEck Biotech. However, Celestica is 2.88 times more volatile than VanEck Biotech ETF. It trades about -0.04 of its potential returns per unit of risk. VanEck Biotech ETF is currently generating about -0.29 per unit of risk. If you would invest  4,494  in Celestica on January 28, 2024 and sell it today you would lose (148.00) from holding Celestica or give up 3.29% of portfolio value over 90 days.

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

Celestica  vs.  VanEck Biotech ETF

Celestica

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Celestica are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Celestica unveiled solid returns over the last few months and may actually be approaching a breakup point.

VanEck Biotech ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Biotech ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Celestica and VanEck Biotech

The main advantage of trading using opposite Celestica and VanEck Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celestica 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.

The idea behind Celestica and VanEck Biotech ETF 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.