Correlation Between Biome Technologies and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Biome Technologies and Auto Trader 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 Biome Technologies and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biome Technologies Plc and Auto Trader Group, you can compare the effects of market volatilities on Biome Technologies and Auto Trader 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 Biome Technologies with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biome Technologies and Auto Trader.
Diversification Opportunities for Biome Technologies and Auto Trader
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Biome and Auto is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Biome Technologies Plc and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Biome Technologies 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 Biome Technologies Plc are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Biome Technologies i.e., Biome Technologies and Auto Trader go up and down completely randomly.
Pair Corralation between Biome Technologies and Auto Trader
Assuming the 90 days trading horizon Biome Technologies Plc is expected to under-perform the Auto Trader. In addition to that, Biome Technologies is 3.47 times more volatile than Auto Trader Group. It trades about -0.08 of its total potential returns per unit of risk. Auto Trader Group is currently generating about 0.07 per unit of volatility. If you would invest 54,726 in Auto Trader Group on August 30, 2024 and sell it today you would earn a total of 28,874 from holding Auto Trader Group or generate 52.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biome Technologies Plc vs. Auto Trader Group
Performance |
| Timeline |
| Biome Technologies Plc |
| Auto Trader Group |
Biome Technologies and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biome Technologies and Auto Trader
The main advantage of trading using opposite Biome Technologies and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biome Technologies position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Biome Technologies vs. Check Point Software | Biome Technologies vs. Made Tech Group | Biome Technologies vs. Microchip Technology | Biome Technologies vs. Infrastrutture Wireless Italiane |
| Auto Trader vs. Walmart | Auto Trader vs. BYD Co | Auto Trader vs. Volkswagen AG | Auto Trader vs. Volkswagen AG Non Vtg |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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