Correlation Between Wool Industry and Biokarpet
Can any of the company-specific risk be diversified away by investing in both Wool Industry and Biokarpet 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 Wool Industry and Biokarpet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wool Industry Tria and Biokarpet SA, you can compare the effects of market volatilities on Wool Industry and Biokarpet 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 Wool Industry with a short position of Biokarpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wool Industry and Biokarpet.
Diversification Opportunities for Wool Industry and Biokarpet
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wool and Biokarpet is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Wool Industry Tria and Biokarpet SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biokarpet SA and Wool Industry 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 Wool Industry Tria are associated (or correlated) with Biokarpet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biokarpet SA has no effect on the direction of Wool Industry i.e., Wool Industry and Biokarpet go up and down completely randomly.
Pair Corralation between Wool Industry and Biokarpet
Assuming the 90 days trading horizon Wool Industry Tria is expected to under-perform the Biokarpet. In addition to that, Wool Industry is 2.0 times more volatile than Biokarpet SA. It trades about -0.02 of its total potential returns per unit of risk. Biokarpet SA is currently generating about -0.02 per unit of volatility. If you would invest 231.00 in Biokarpet SA on August 31, 2024 and sell it today you would lose (53.00) from holding Biokarpet SA or give up 22.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Wool Industry Tria vs. Biokarpet SA
Performance |
| Timeline |
| Wool Industry Tria |
| Biokarpet SA |
Wool Industry and Biokarpet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wool Industry and Biokarpet
The main advantage of trading using opposite Wool Industry and Biokarpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wool Industry position performs unexpectedly, Biokarpet 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 Biokarpet will offset losses from the drop in Biokarpet's long position.| Wool Industry vs. Alumil Aluminium Industry | Wool Industry vs. Elton International Trading | Wool Industry vs. Ekter SA | Wool Industry vs. Avax SA |
| Biokarpet vs. Alumil Aluminium Industry | Biokarpet vs. Elton International Trading | Biokarpet vs. Ekter SA | Biokarpet vs. Avax SA |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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