Correlation Between BioLight Life and BioLine RX
Can any of the company-specific risk be diversified away by investing in both BioLight Life and BioLine RX 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 BioLight Life and BioLine RX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BioLight Life Sciences and BioLine RX, you can compare the effects of market volatilities on BioLight Life and BioLine RX 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 BioLight Life with a short position of BioLine RX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BioLight Life and BioLine RX.
Diversification Opportunities for BioLight Life and BioLine RX
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BioLight and BioLine is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BioLight Life Sciences and BioLine RX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLine RX and BioLight Life 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 BioLight Life Sciences are associated (or correlated) with BioLine RX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLine RX has no effect on the direction of BioLight Life i.e., BioLight Life and BioLine RX go up and down completely randomly.
Pair Corralation between BioLight Life and BioLine RX
Assuming the 90 days trading horizon BioLight Life Sciences is expected to under-perform the BioLine RX. But the stock apears to be less risky and, when comparing its historical volatility, BioLight Life Sciences is 1.54 times less risky than BioLine RX. The stock trades about -0.06 of its potential returns per unit of risk. The BioLine RX is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,910 in BioLine RX on January 24, 2024 and sell it today you would lose (1,240) from holding BioLine RX or give up 42.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BioLight Life Sciences vs. BioLine RX
Performance |
| Timeline |
| BioLight Life Sciences |
| BioLine RX |
BioLight Life and BioLine RX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BioLight Life and BioLine RX
The main advantage of trading using opposite BioLight Life and BioLine RX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BioLight Life position performs unexpectedly, BioLine RX 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 BioLine RX will offset losses from the drop in BioLine RX's long position.The idea behind BioLight Life Sciences and BioLine RX 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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