Correlation Between Bio Meat and Dan Hotels

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

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

Diversification Opportunities for Bio Meat and Dan Hotels

0.38

Correlation Coefficient

Bio Meat  Dan Hotels

Weak diversification

The 3 months correlation between Bio and Dan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bio Meat Foodtech and Dan Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dan Hotels and Bio Meat 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 Bio Meat Foodtech are associated (or correlated) with Dan Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dan Hotels has no effect on the direction of Bio Meat i.e., Bio Meat and Dan Hotels go up and down completely randomly.

Pair Corralation between Bio Meat and Dan Hotels

Assuming the 90 days trading horizon Bio Meat Foodtech is expected to under-perform the Dan Hotels. In addition to that, Bio Meat is 1.27 times more volatile than Dan Hotels. It trades about 0.0 of its total potential returns per unit of risk. Dan Hotels is currently generating about 0.0 per unit of volatility. If you would invest  230,000  in Dan Hotels on September 30, 2024 and sell it today you would lose (1,500) from holding Dan Hotels or give up 0.65% of portfolio value over 90 days.

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

Bio Meat Foodtech  vs.  Dan Hotels

Bio Meat Foodtech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bio Meat Foodtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bio Meat is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dan Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dan Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bio Meat and Dan Hotels

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

The idea behind Bio Meat Foodtech and Dan Hotels 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.