Correlation Between BioLight Life and Aerodrome

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

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

Diversification Opportunities for BioLight Life and Aerodrome

0.38

Correlation Coefficient

BioLight Life  Aerodrome

Weak diversification

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

Pair Corralation between BioLight Life and Aerodrome

Assuming the 90 days trading horizon BioLight Life is expected to generate 5.94 times less return on investment than Aerodrome. But when comparing it to its historical volatility, BioLight Life Sciences is 2.41 times less risky than Aerodrome. It trades about 0.06 of its potential returns per unit of risk. Aerodrome Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,500  in Aerodrome Group on September 26, 2024 and sell it today you would earn a total of  3,170  from holding Aerodrome Group or generate 90.57% return on investment over 90 days.

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

BioLight Life Sciences  vs.  Aerodrome Group

BioLight Life Sciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BioLight Life Sciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BioLight Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Aerodrome Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerodrome Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aerodrome sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BioLight Life and Aerodrome

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

The idea behind BioLight Life Sciences and Aerodrome Group 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.