Correlation Between Biocardia and DR Horton

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

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

Diversification Opportunities for Biocardia and DR Horton

0.84

Correlation Coefficient

Biocardia  DR Horton

Very poor diversification

The 3 months correlation between Biocardia and DHI is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Biocardia and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton and Biocardia 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 Biocardia are associated (or correlated) with DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of Biocardia i.e., Biocardia and DR Horton go up and down completely randomly.

Pair Corralation between Biocardia and DR Horton

Given the investment horizon of 90 days Biocardia is expected to generate 3.74 times more return on investment than DR Horton. However, Biocardia is 3.74 times more volatile than DR Horton. It trades about 0.09 of its potential returns per unit of risk. DR Horton is currently generating about -0.59 per unit of risk. If you would invest  228.00  in Biocardia on September 30, 2024 and sell it today you would earn a total of  18.00  from holding Biocardia or generate 7.89% return on investment over 90 days.

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

Biocardia  vs.  DR Horton

Biocardia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biocardia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Biocardia and DR Horton

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

The idea behind Biocardia and DR Horton 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.