Correlation Between Biodesix and Applied DNA

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

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

Diversification Opportunities for Biodesix and Applied DNA

0.69

Correlation Coefficient

Biodesix  Applied DNA

Poor diversification

The 3 months correlation between Biodesix and Applied is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Biodesix and Applied DNA Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied DNA Sciences and Biodesix 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 Biodesix are associated (or correlated) with Applied DNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied DNA Sciences has no effect on the direction of Biodesix i.e., Biodesix and Applied DNA go up and down completely randomly.

Pair Corralation between Biodesix and Applied DNA

Given the investment horizon of 90 days Biodesix is expected to generate 0.26 times more return on investment than Applied DNA. However, Biodesix is 3.77 times less risky than Applied DNA. It trades about 0.01 of its potential returns per unit of risk. Applied DNA Sciences is currently generating about -0.06 per unit of risk. If you would invest  142.00  in Biodesix on September 14, 2024 and sell it today you would lose (7.90) from holding Biodesix or give up 5.56% of portfolio value over 90 days.

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

Biodesix  vs.  Applied DNA Sciences

Biodesix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biodesix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly 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.

Applied DNA Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied DNA Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Biodesix and Applied DNA

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

The idea behind Biodesix and Applied DNA Sciences 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.