Can any of the company-specific risk be diversified away by investing in both Virax Biolabs and Biovie 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 Virax Biolabs and Biovie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virax Biolabs Group and Biovie Inc, you can compare the effects of market volatilities on Virax Biolabs and Biovie 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 Virax Biolabs with a short position of Biovie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virax Biolabs and Biovie.
Diversification Opportunities for Virax Biolabs and Biovie
The 3 months correlation between Virax and Biovie is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Virax Biolabs Group and Biovie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biovie Inc and Virax Biolabs 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 Virax Biolabs Group are associated (or correlated) with Biovie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biovie Inc has no effect on the direction of Virax Biolabs i.e., Virax Biolabs and Biovie go up and down completely randomly.
Given the investment horizon of 90 days Virax Biolabs Group is expected to generate 1.62 times more return on investment than Biovie. However, Virax Biolabs is 1.62 times more volatile than Biovie Inc. It trades about 0.04 of its potential returns per unit of risk. Biovie Inc is currently generating about -0.24 per unit of risk. If you would invest 98.00 in Virax Biolabs Group on March 6, 2024 and sell it today you would earn a total of 6.00 from holding Virax Biolabs Group or generate 6.12% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Virax Biolabs Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Virax Biolabs showed solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Biovie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.