Correlation Between Brickell Biotech and Educational Development

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

By analyzing existing cross correlation between Brickell Biotech and Educational Development, you can compare the effects of market volatilities on Brickell Biotech and Educational Development 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 Brickell Biotech with a short position of Educational Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brickell Biotech and Educational Development.

Diversification Opportunities for Brickell Biotech and Educational Development

-0.6

Correlation Coefficient

Brickell Biotech  Educational Development

Excellent diversification

The 3 months correlation between Brickell and Educational is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Brickell Biotech and Educational Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Educational Development and Brickell Biotech 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 Brickell Biotech are associated (or correlated) with Educational Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Educational Development has no effect on the direction of Brickell Biotech i.e., Brickell Biotech and Educational Development go up and down completely randomly.

Pair Corralation between Brickell Biotech and Educational Development

Considering the 90-day investment horizon Brickell Biotech is expected to under-perform the Educational Development. But the stock apears to be less risky and, when comparing its historical volatility, Brickell Biotech is 3.44 times less risky than Educational Development. The stock trades about -0.06 of its potential returns per unit of risk. The Educational Development is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  149.00  in Educational Development on January 26, 2024 and sell it today you would earn a total of  57.00  from holding Educational Development or generate 38.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Brickell Biotech  vs.  Educational Development

Brickell Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brickell Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Educational Development

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Educational Development are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Educational Development exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brickell Biotech and Educational Development

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

The idea behind Brickell Biotech and Educational Development 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.