Can any of the company-specific risk be diversified away by investing in both BIOLASE and Bone Biologics 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 BIOLASE and Bone Biologics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BIOLASE and Bone Biologics Corp, you can compare the effects of market volatilities on BIOLASE and Bone Biologics 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 BIOLASE with a short position of Bone Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of BIOLASE and Bone Biologics.
Diversification Opportunities for BIOLASE and Bone Biologics
The 3 months correlation between BIOLASE and Bone is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding BIOLASE and Bone Biologics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bone Biologics Corp and BIOLASE 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 BIOLASE are associated (or correlated) with Bone Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bone Biologics Corp has no effect on the direction of BIOLASE i.e., BIOLASE and Bone Biologics go up and down completely randomly.
Pair Corralation between BIOLASE and Bone Biologics
Given the investment horizon of 90 days BIOLASE is expected to generate 1.0 times more return on investment than Bone Biologics. However, BIOLASE is 1.0 times more volatile than Bone Biologics Corp. It trades about 0.0 of its potential returns per unit of risk. Bone Biologics Corp is currently generating about -0.05 per unit of risk. If you would invest 18.00 in BIOLASE on March 6, 2024 and sell it today you would lose (1.00) from holding BIOLASE or give up 5.56% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in BIOLASE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, BIOLASE disclosed solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Bone Biologics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.