Correlation Between IAR SA and Biofarm Bucure
Can any of the company-specific risk be diversified away by investing in both IAR SA and Biofarm Bucure 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 IAR SA and Biofarm Bucure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IAR SA and Biofarm Bucure, you can compare the effects of market volatilities on IAR SA and Biofarm Bucure 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 IAR SA with a short position of Biofarm Bucure. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR SA and Biofarm Bucure.
Diversification Opportunities for IAR SA and Biofarm Bucure
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IAR and Biofarm is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding IAR SA and Biofarm Bucure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofarm Bucure and IAR SA 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 IAR SA are associated (or correlated) with Biofarm Bucure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biofarm Bucure has no effect on the direction of IAR SA i.e., IAR SA and Biofarm Bucure go up and down completely randomly.
Pair Corralation between IAR SA and Biofarm Bucure
Assuming the 90 days trading horizon IAR SA is expected to generate 1.68 times more return on investment than Biofarm Bucure. However, IAR SA is 1.68 times more volatile than Biofarm Bucure. It trades about 0.01 of its potential returns per unit of risk. Biofarm Bucure is currently generating about -0.27 per unit of risk. If you would invest 1,265 in IAR SA on August 30, 2024 and sell it today you would earn a total of 0.00 from holding IAR SA or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
IAR SA vs. Biofarm Bucure
Performance |
| Timeline |
| IAR SA |
| Biofarm Bucure |
IAR SA and Biofarm Bucure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAR SA and Biofarm Bucure
The main advantage of trading using opposite IAR SA and Biofarm Bucure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR SA position performs unexpectedly, Biofarm Bucure 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 Biofarm Bucure will offset losses from the drop in Biofarm Bucure's long position.The idea behind IAR SA and Biofarm Bucure 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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