Correlation Between Biofarm Bucure and Compania Hoteliera
Can any of the company-specific risk be diversified away by investing in both Biofarm Bucure and Compania Hoteliera 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 Biofarm Bucure and Compania Hoteliera into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biofarm Bucure and Compania Hoteliera InterContinental, you can compare the effects of market volatilities on Biofarm Bucure and Compania Hoteliera 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 Biofarm Bucure with a short position of Compania Hoteliera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biofarm Bucure and Compania Hoteliera.
Diversification Opportunities for Biofarm Bucure and Compania Hoteliera
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Biofarm and Compania is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Biofarm Bucure and Compania Hoteliera InterContin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Hoteliera and Biofarm Bucure 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 Biofarm Bucure are associated (or correlated) with Compania Hoteliera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Hoteliera has no effect on the direction of Biofarm Bucure i.e., Biofarm Bucure and Compania Hoteliera go up and down completely randomly.
Pair Corralation between Biofarm Bucure and Compania Hoteliera
Assuming the 90 days trading horizon Biofarm Bucure is expected to generate 26.77 times less return on investment than Compania Hoteliera. But when comparing it to its historical volatility, Biofarm Bucure is 3.45 times less risky than Compania Hoteliera. It trades about 0.01 of its potential returns per unit of risk. Compania Hoteliera InterContinental is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Compania Hoteliera InterContinental on August 28, 2024 and sell it today you would earn a total of 3.00 from holding Compania Hoteliera InterContinental or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biofarm Bucure vs. Compania Hoteliera InterContin
Performance |
| Timeline |
| Biofarm Bucure |
| Compania Hoteliera |
Biofarm Bucure and Compania Hoteliera Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biofarm Bucure and Compania Hoteliera
The main advantage of trading using opposite Biofarm Bucure and Compania Hoteliera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biofarm Bucure position performs unexpectedly, Compania Hoteliera 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 Compania Hoteliera will offset losses from the drop in Compania Hoteliera's long position.The idea behind Biofarm Bucure and Compania Hoteliera InterContinental 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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