Correlation Between Compugen and Best Buy
Can any of the company-specific risk be diversified away by investing in both Compugen and Best Buy 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 Compugen and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compugen and Best Buy Co, you can compare the effects of market volatilities on Compugen and Best Buy 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 Compugen with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compugen and Best Buy.
Diversification Opportunities for Compugen and Best Buy
Poor diversification
The 3 months correlation between Compugen and Best is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Compugen and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Compugen 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 Compugen are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Compugen i.e., Compugen and Best Buy go up and down completely randomly.
Pair Corralation between Compugen and Best Buy
Assuming the 90 days trading horizon Compugen is expected to generate 9.03 times more return on investment than Best Buy. However, Compugen is 9.03 times more volatile than Best Buy Co. It trades about 0.11 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.09 per unit of risk. If you would invest 28,020 in Compugen on January 25, 2024 and sell it today you would earn a total of 45,600 from holding Compugen or generate 162.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.49% |
| Values | Daily Returns |
Compugen vs. Best Buy Co
Performance |
| Timeline |
| Compugen |
| Best Buy |
Compugen and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compugen and Best Buy
The main advantage of trading using opposite Compugen and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compugen position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.The idea behind Compugen and Best Buy Co 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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