Correlation Between Athens General and Bioter SA

Can any of the company-specific risk be diversified away by investing in both Athens General and Bioter SA 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 Athens General and Bioter SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Athens General Composite and Bioter SA, you can compare the effects of market volatilities on Athens General and Bioter SA 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 Athens General with a short position of Bioter SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Athens General and Bioter SA.

Diversification Opportunities for Athens General and Bioter SA

0.44

Correlation Coefficient

Athens General  Bioter SA

Very weak diversification

The 3 months correlation between Athens and Bioter is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Athens General Composite and Bioter SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bioter SA and Athens General 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 Athens General Composite are associated (or correlated) with Bioter SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bioter SA has no effect on the direction of Athens General i.e., Athens General and Bioter SA go up and down completely randomly.

Pair Corralation between Athens General and Bioter SA

Assuming the 90 days trading horizon Athens General Composite is expected to generate 0.27 times more return on investment than Bioter SA. However, Athens General Composite is 3.64 times less risky than Bioter SA. It trades about 0.21 of its potential returns per unit of risk. Bioter SA is currently generating about -0.11 per unit of risk. If you would invest  138,638  in Athens General Composite on February 4, 2024 and sell it today you would earn a total of  6,586  from holding Athens General Composite or generate 4.75% return on investment over 90 days.

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

Athens General Composite  vs.  Bioter SA

Pair Trading with Athens General and Bioter SA

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

The idea behind Athens General Composite and Bioter SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.