Correlation Between Biofarm Bucure and Aerostar Bacau

Can any of the company-specific risk be diversified away by investing in both Biofarm Bucure and Aerostar Bacau 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 Biofarm Bucure and Aerostar Bacau into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Biofarm Bucure and Aerostar Bacau, you can compare the effects of market volatilities on Biofarm Bucure and Aerostar Bacau 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 Biofarm Bucure with a short position of Aerostar Bacau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biofarm Bucure and Aerostar Bacau.

Diversification Opportunities for Biofarm Bucure and Aerostar Bacau

0.56

Correlation Coefficient

Biofarm Bucure  Aerostar Bacau

Very weak diversification

The 3 months correlation between Biofarm and Aerostar is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Biofarm Bucure and Aerostar Bacau in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerostar Bacau and Biofarm Bucure 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 Biofarm Bucure are associated (or correlated) with Aerostar Bacau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerostar Bacau has no effect on the direction of Biofarm Bucure i.e., Biofarm Bucure and Aerostar Bacau go up and down completely randomly.

Pair Corralation between Biofarm Bucure and Aerostar Bacau

Assuming the 90 days trading horizon Biofarm Bucure is expected to generate 0.75 times more return on investment than Aerostar Bacau. However, Biofarm Bucure is 1.34 times less risky than Aerostar Bacau. It trades about -0.07 of its potential returns per unit of risk. Aerostar Bacau is currently generating about -0.07 per unit of risk. If you would invest  78.00  in Biofarm Bucure on August 23, 2024 and sell it today you would lose (3.00) from holding Biofarm Bucure or give up 3.85% of portfolio value over 90 days.

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

Biofarm Bucure  vs.  Aerostar Bacau

Biofarm Bucure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biofarm Bucure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Biofarm Bucure is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Aerostar Bacau

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerostar Bacau has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Aerostar Bacau is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Biofarm Bucure and Aerostar Bacau

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

The idea behind Biofarm Bucure and Aerostar Bacau 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.