Biotech Strategy
What is Biotechnology?
Biotechnology is an area of biology involving the use of living systems and organisms to develop or make products, expanding in the 20th and 21st centuries to include new sciences such as genomics, recombinant gene techniques, applied immunology, technology, and the development of pharmaceutical therapies
2014 Correlation Study
In 2014, Alexander and Nickolas Urpí co-researched the correlation of returns between the stocks within the NASDAQ Biotechnology Index and the index itself
They developed a white paper showing that, in fact, the returns of stocks within the index are NOT highly correlated with the return of the index itself
In 2020, an updated study with the intervening years of data verified the original results
Over 40% of stocks in the NBI had yearly returns with no significant correlation to the index return (a correlation coefficient less than 0.3)
The average coefficient of determination (RSQ) was 0.311, indicating that the index returns do not significantly explain the individual stock returns
Strategy Characteristics
Insider-Driven: Our model searches for specific types of insider activity and other quantitative data (i.e. float, market cap, relative strength index, etc.), consolidating this information to determine when to purchase securities and what the optimum holding period should be. The model then dictates when to sell the securities.
Not a Hedge: Our model is designed to select from the biotechnology sector a subset of stocks most likely to outperform the market over the long term. It is not an inverse strategy trying to perform well when the market is down or a hedge trying to deliver outsized returns in the short term.
Disciplined Strategy: Our model involves limited human input other than the expertise that has gone into its design and upkeep. The quantitative model uses data to determine what securities to purchase, when to purchase them, and when to sell them.
Investment Strategy: Our model evaluates publicly available information on corporate insider activity and quantitative data to form its investment decisions. The model only invests in securities in the biotechnology sector.
Our Model
Our model searches for specific types of insider activity and other quantitative data (i.e. float, market cap, relative strength index, etc.), consolidating this information to determine when to purchase securities and what the optimum holding period should be. The model then dictates when to sell the securities. Our model is designed to select from the biotechnology sector a subset of stocks most likely to outperform the market over the long term. It is not an inverse strategy trying to perform well when the market is down or a hedge trying to deliver outsized returns in the short term.
Investment Strategy
Our model evaluates publicly available information on corporate insider activity and quantitative data to form its investment decisions. The model only invests in securities in the biotechnology sector.
Risk Statistics
Cumulative Return: 149.22%
Alpha (vs. NBI): 4.34
Beta (vs. NBI) 1.07
Correlation (vs. NBI) 0.85
Sharpe Ratio: 0.63