Correlation Between Federal Signal and Bion Environmental

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

By analyzing existing cross correlation between Federal Signal and Bion Environmental Technologies, you can compare the effects of market volatilities on Federal Signal and Bion Environmental 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 Federal Signal with a short position of Bion Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and Bion Environmental.

Diversification Opportunities for Federal Signal and Bion Environmental

-0.72

Correlation Coefficient

Federal Signal  Bion Environmental

Pay attention - limited upside

The 3 months correlation between Federal and Bion is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and Bion Environmental Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bion Environmental and Federal Signal 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 Federal Signal are associated (or correlated) with Bion Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bion Environmental has no effect on the direction of Federal Signal i.e., Federal Signal and Bion Environmental go up and down completely randomly.

Pair Corralation between Federal Signal and Bion Environmental

Considering the 90-day investment horizon Federal Signal is expected to generate 0.17 times more return on investment than Bion Environmental. However, Federal Signal is 5.95 times less risky than Bion Environmental. It trades about 0.09 of its potential returns per unit of risk. Bion Environmental Technologies is currently generating about -0.12 per unit of risk. If you would invest  8,057  in Federal Signal on March 1, 2024 and sell it today you would earn a total of  564.00  from holding Federal Signal or generate 7.0% return on investment over 90 days.

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

Federal Signal  vs.  Bion Environmental Technologie

Federal Signal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Signal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Federal Signal may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Bion Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Federal Signal and Bion Environmental

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

The idea behind Federal Signal and Bion Environmental Technologies 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.