Correlation Between BioLight Life and International Business

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

By analyzing existing cross correlation between BioLight Life Sciences and International Business Machines, you can compare the effects of market volatilities on BioLight Life and International Business 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 BioLight Life with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of BioLight Life and International Business.

Diversification Opportunities for BioLight Life and International Business

0.53

Correlation Coefficient

BioLight Life  International Business

Very weak diversification

The 3 months correlation between BioLight and International is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BioLight Life Sciences and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and BioLight Life 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 BioLight Life Sciences are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of BioLight Life i.e., BioLight Life and International Business go up and down completely randomly.

Pair Corralation between BioLight Life and International Business

Assuming the 90 days trading horizon BioLight Life Sciences is expected to under-perform the International Business. In addition to that, BioLight Life is 2.11 times more volatile than International Business Machines. It trades about -0.29 of its total potential returns per unit of risk. International Business Machines is currently generating about -0.21 per unit of volatility. If you would invest  19,306  in International Business Machines on February 1, 2024 and sell it today you would lose (2,686) from holding International Business Machines or give up 13.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.61%
Values	Daily Returns

BioLight Life Sciences  vs.  International Business Machine

BioLight Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BioLight Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with BioLight Life and International Business

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

The idea behind BioLight Life Sciences and International Business Machines 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.