Correlation Between BIO Key and Ameriguard Security

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

By analyzing existing cross correlation between BIO Key International and Ameriguard Security Services, you can compare the effects of market volatilities on BIO Key and Ameriguard Security 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 Key with a short position of Ameriguard Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of BIO Key and Ameriguard Security.

Diversification Opportunities for BIO Key and Ameriguard Security

0.35

Correlation Coefficient

BIO Key  Ameriguard Security

Weak diversification

The 3 months correlation between BIO and Ameriguard is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BIO Key International and Ameriguard Security Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriguard Security and BIO Key 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 Key International are associated (or correlated) with Ameriguard Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriguard Security has no effect on the direction of BIO Key i.e., BIO Key and Ameriguard Security go up and down completely randomly.

Pair Corralation between BIO Key and Ameriguard Security

Given the investment horizon of 90 days BIO Key International is expected to generate 0.45 times more return on investment than Ameriguard Security. However, BIO Key International is 2.22 times less risky than Ameriguard Security. It trades about -0.08 of its potential returns per unit of risk. Ameriguard Security Services is currently generating about -0.09 per unit of risk. If you would invest  130.00  in BIO Key International on September 5, 2024 and sell it today you would lose (18.00) from holding BIO Key International or give up 13.85% of portfolio value over 90 days.

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

BIO Key International  vs.  Ameriguard Security Services

BIO Key International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BIO Key International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, BIO Key demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Ameriguard Security

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ameriguard Security Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BIO Key and Ameriguard Security

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

The idea behind BIO Key International and Ameriguard Security Services 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.