Correlation Between Wool Industry and Biokarpet

Can any of the company-specific risk be diversified away by investing in both Wool Industry and Biokarpet 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 Wool Industry and Biokarpet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wool Industry Tria and Biokarpet SA, you can compare the effects of market volatilities on Wool Industry and Biokarpet 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 Wool Industry with a short position of Biokarpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wool Industry and Biokarpet.

Diversification Opportunities for Wool Industry and Biokarpet

0.55

Correlation Coefficient

Wool Industry  Biokarpet

Very weak diversification

The 3 months correlation between Wool and Biokarpet is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Wool Industry Tria and Biokarpet SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biokarpet SA and Wool Industry 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 Wool Industry Tria are associated (or correlated) with Biokarpet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biokarpet SA has no effect on the direction of Wool Industry i.e., Wool Industry and Biokarpet go up and down completely randomly.

Pair Corralation between Wool Industry and Biokarpet

Assuming the 90 days trading horizon Wool Industry Tria is expected to under-perform the Biokarpet. In addition to that, Wool Industry is 2.03 times more volatile than Biokarpet SA. It trades about -0.11 of its total potential returns per unit of risk. Biokarpet SA is currently generating about -0.12 per unit of volatility. If you would invest  283.00  in Biokarpet SA on March 12, 2024 and sell it today you would lose (31.00) from holding Biokarpet SA or give up 10.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Wool Industry Tria  vs.  Biokarpet SA

Wool Industry Tria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wool Industry Tria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Biokarpet SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biokarpet SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Wool Industry and Biokarpet

The main advantage of trading using opposite Wool Industry and Biokarpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wool Industry position performs unexpectedly, Biokarpet 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 Biokarpet will offset losses from the drop in Biokarpet's long position.

The idea behind Wool Industry Tria and Biokarpet SA 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.