Correlation Between Consumer Products and Biotechnology Fund

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

By analyzing existing cross correlation between Consumer Products Fund and Biotechnology Fund Investor, you can compare the effects of market volatilities on Consumer Products and Biotechnology Fund 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 Consumer Products with a short position of Biotechnology Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Products and Biotechnology Fund.

Diversification Opportunities for Consumer Products and Biotechnology Fund

-0.65

Correlation Coefficient

Consumer Products  Biotechnology Fund

Excellent diversification

The 3 months correlation between Consumer and Biotechnology is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Products Fund and Biotechnology Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Fund and Consumer Products 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 Consumer Products Fund are associated (or correlated) with Biotechnology Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Fund has no effect on the direction of Consumer Products i.e., Consumer Products and Biotechnology Fund go up and down completely randomly.

Pair Corralation between Consumer Products and Biotechnology Fund

Assuming the 90 days horizon Consumer Products Fund is expected to under-perform the Biotechnology Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Consumer Products Fund is 1.48 times less risky than Biotechnology Fund. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Biotechnology Fund Investor is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  7,206  in Biotechnology Fund Investor on September 9, 2025 and sell it today you would earn a total of  1,324  from holding Biotechnology Fund Investor or generate 18.37% return on investment over 90 days.

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

Consumer Products Fund  vs.  Biotechnology Fund Investor

Consumer Products

Risk-Adjusted Performance

Weakest

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

Biotechnology Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biotechnology Fund Investor are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Biotechnology Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consumer Products and Biotechnology Fund

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

The idea behind Consumer Products Fund and Biotechnology Fund Investor 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..