Correlation Between Biofarm Bucure and Compania Hoteliera

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

By analyzing existing cross correlation between Biofarm Bucure and Compania Hoteliera InterContinental, you can compare the effects of market volatilities on Biofarm Bucure and Compania Hoteliera 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 Compania Hoteliera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biofarm Bucure and Compania Hoteliera.

Diversification Opportunities for Biofarm Bucure and Compania Hoteliera

-0.43

Correlation Coefficient

Biofarm Bucure  Compania Hoteliera

Very good diversification

The 3 months correlation between Biofarm and Compania is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Biofarm Bucure and Compania Hoteliera InterContin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Hoteliera 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 Compania Hoteliera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Hoteliera has no effect on the direction of Biofarm Bucure i.e., Biofarm Bucure and Compania Hoteliera go up and down completely randomly.

Pair Corralation between Biofarm Bucure and Compania Hoteliera

Assuming the 90 days trading horizon Biofarm Bucure is expected to under-perform the Compania Hoteliera. But the stock apears to be less risky and, when comparing its historical volatility, Biofarm Bucure is 3.66 times less risky than Compania Hoteliera. The stock trades about -0.08 of its potential returns per unit of risk. The Compania Hoteliera InterContinental is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Compania Hoteliera InterContinental on September 15, 2024 and sell it today you would earn a total of  2.00  from holding Compania Hoteliera InterContinental or generate 9.09% return on investment over 90 days.

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

Biofarm Bucure  vs.  Compania Hoteliera InterContin

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.

Compania Hoteliera

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Hoteliera InterContinental are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Compania Hoteliera displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biofarm Bucure and Compania Hoteliera

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

The idea behind Biofarm Bucure and Compania Hoteliera InterContinental 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.