Correlation Between Bright Minds and GRI Bio

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

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

Diversification Opportunities for Bright Minds and GRI Bio

0.84

Correlation Coefficient

Bright Minds  GRI Bio

Very poor diversification

The 3 months correlation between Bright and GRI is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bright Minds Biosciences and GRI Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRI Bio and Bright Minds 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 Bright Minds Biosciences are associated (or correlated) with GRI Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRI Bio has no effect on the direction of Bright Minds i.e., Bright Minds and GRI Bio go up and down completely randomly.

Pair Corralation between Bright Minds and GRI Bio

Given the investment horizon of 90 days Bright Minds Biosciences is expected to generate 4.96 times more return on investment than GRI Bio. However, Bright Minds is 4.96 times more volatile than GRI Bio. It trades about 0.06 of its potential returns per unit of risk. GRI Bio is currently generating about -0.12 per unit of risk. If you would invest  280.00  in Bright Minds Biosciences on August 31, 2024 and sell it today you would earn a total of  3,638  from holding Bright Minds Biosciences or generate 1299.29% return on investment over 90 days.

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

Bright Minds Biosciences  vs.  GRI Bio

Bright Minds Biosciences

Risk-Adjusted Performance

11 of 100

Good

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

GRI Bio

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GRI Bio are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, GRI Bio demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bright Minds and GRI Bio

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

The idea behind Bright Minds Biosciences and GRI Bio 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.