Correlation Between Duke Energy and BioLight Life
Can any of the company-specific risk be diversified away by investing in both Duke Energy and BioLight Life 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 Duke Energy and BioLight Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Duke Energy and BioLight Life Sciences, you can compare the effects of market volatilities on Duke Energy and BioLight Life 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 Duke Energy with a short position of BioLight Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duke Energy and BioLight Life.
Diversification Opportunities for Duke Energy and BioLight Life
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Duke and BioLight is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and BioLight Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLight Life Sciences and Duke Energy 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 Duke Energy are associated (or correlated) with BioLight Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLight Life Sciences has no effect on the direction of Duke Energy i.e., Duke Energy and BioLight Life go up and down completely randomly.
Pair Corralation between Duke Energy and BioLight Life
Considering the 90-day investment horizon Duke Energy is expected to generate 0.42 times more return on investment than BioLight Life. However, Duke Energy is 2.37 times less risky than BioLight Life. It trades about 0.12 of its potential returns per unit of risk. BioLight Life Sciences is currently generating about -0.54 per unit of risk. If you would invest 9,541 in Duke Energy on January 20, 2024 and sell it today you would earn a total of 283.00 from holding Duke Energy or generate 2.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 81.82% |
| Values | Daily Returns |
Duke Energy vs. BioLight Life Sciences
Performance |
| Timeline |
| Duke Energy |
| BioLight Life Sciences |
Duke Energy and BioLight Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Duke Energy and BioLight Life
The main advantage of trading using opposite Duke Energy and BioLight Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duke Energy position performs unexpectedly, BioLight Life 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 BioLight Life will offset losses from the drop in BioLight Life's long position.The idea behind Duke Energy and BioLight Life Sciences 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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