Correlation Between Bionoid Pharma and Groove Botanicals

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

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

Diversification Opportunities for Bionoid Pharma and Groove Botanicals

-0.1

Correlation Coefficient

Bionoid Pharma  Groove Botanicals

Good diversification

The 3 months correlation between Bionoid and Groove is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bionoid Pharma and Groove Botanicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groove Botanicals and Bionoid Pharma 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 Bionoid Pharma are associated (or correlated) with Groove Botanicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groove Botanicals has no effect on the direction of Bionoid Pharma i.e., Bionoid Pharma and Groove Botanicals go up and down completely randomly.

Pair Corralation between Bionoid Pharma and Groove Botanicals

Given the investment horizon of 90 days Bionoid Pharma is expected to generate 1.74 times more return on investment than Groove Botanicals. However, Bionoid Pharma is 1.74 times more volatile than Groove Botanicals. It trades about 0.11 of its potential returns per unit of risk. Groove Botanicals is currently generating about -0.21 per unit of risk. If you would invest  20.00  in Bionoid Pharma on September 17, 2024 and sell it today you would earn a total of  7.00  from holding Bionoid Pharma or generate 35.0% return on investment over 90 days.

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

Bionoid Pharma  vs.  Groove Botanicals

Bionoid Pharma

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bionoid Pharma are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Bionoid Pharma reported solid returns over the last few months and may actually be approaching a breakup point.

Groove Botanicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Groove Botanicals 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 basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bionoid Pharma and Groove Botanicals

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

The idea behind Bionoid Pharma and Groove Botanicals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.