Correlation Between Know IT and BioGaia AB
Can any of the company-specific risk be diversified away by investing in both Know IT and BioGaia AB 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 Know IT and BioGaia AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Know IT AB and BioGaia AB, you can compare the effects of market volatilities on Know IT and BioGaia AB 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 Know IT with a short position of BioGaia AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Know IT and BioGaia AB.
Diversification Opportunities for Know IT and BioGaia AB
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Know and BioGaia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Know IT AB and BioGaia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioGaia AB and Know IT 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 Know IT AB are associated (or correlated) with BioGaia AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioGaia AB has no effect on the direction of Know IT i.e., Know IT and BioGaia AB go up and down completely randomly.
Pair Corralation between Know IT and BioGaia AB
Assuming the 90 days trading horizon Know IT AB is expected to generate 1.22 times more return on investment than BioGaia AB. However, Know IT is 1.22 times more volatile than BioGaia AB. It trades about 0.07 of its potential returns per unit of risk. BioGaia AB is currently generating about 0.06 per unit of risk. If you would invest 13,166 in Know IT AB on September 1, 2024 and sell it today you would earn a total of 294.00 from holding Know IT AB or generate 2.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Know IT AB vs. BioGaia AB
Performance |
| Timeline |
| Know IT AB |
| BioGaia AB |
Know IT and BioGaia AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Know IT and BioGaia AB
The main advantage of trading using opposite Know IT and BioGaia AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Know IT position performs unexpectedly, BioGaia AB 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 BioGaia AB will offset losses from the drop in BioGaia AB's long position.The idea behind Know IT AB and BioGaia AB 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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