Can any of the company-specific risk be diversified away by investing in both Si Bone and Ainos 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 Si Bone and Ainos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Si Bone and Ainos Inc, you can compare the effects of market volatilities on Si Bone and Ainos 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 Si Bone with a short position of Ainos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Si Bone and Ainos.
Diversification Opportunities for Si Bone and Ainos
The 3 months correlation between SIBN and Ainos is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Si Bone and Ainos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ainos Inc and Si Bone 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 Si Bone are associated (or correlated) with Ainos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ainos Inc has no effect on the direction of Si Bone i.e., Si Bone and Ainos go up and down completely randomly.
Given the investment horizon of 90 days Si Bone is expected to generate 2.38 times less return on investment than Ainos. But when comparing it to its historical volatility, Si Bone is 4.28 times less risky than Ainos. It trades about 0.02 of its potential returns per unit of risk. Ainos Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,616 in Ainos Inc on March 6, 2024 and sell it today you would lose (2,532) from holding Ainos Inc or give up 96.79% of portfolio value over 90 days.
Over the last 90 days Si Bone has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Over the last 90 days Ainos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.