Correlation Between Bright Minds and Illumina

Can any of the company-specific risk be diversified away by investing in both Bright Minds and Illumina 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 Illumina 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 Illumina, you can compare the effects of market volatilities on Bright Minds and Illumina 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 Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Minds and Illumina.

Diversification Opportunities for Bright Minds and Illumina

0.74

Correlation Coefficient

Bright Minds  Illumina

Poor diversification

The 3 months correlation between Bright and Illumina is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bright Minds Biosciences and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of Bright Minds i.e., Bright Minds and Illumina go up and down completely randomly.

Pair Corralation between Bright Minds and Illumina

Given the investment horizon of 90 days Bright Minds Biosciences is expected to under-perform the Illumina. In addition to that, Bright Minds is 2.55 times more volatile than Illumina. It trades about -0.06 of its total potential returns per unit of risk. Illumina is currently generating about -0.01 per unit of volatility. If you would invest  14,600  in Illumina on August 30, 2024 and sell it today you would lose (164.00) from holding Illumina or give up 1.12% of portfolio value over 90 days.

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

Bright Minds Biosciences  vs.  Illumina

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 weak basic indicators, Bright Minds reported solid returns over the last few months and may actually be approaching a breakup point.

Illumina

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Illumina are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Illumina may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Bright Minds and Illumina

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

The idea behind Bright Minds Biosciences and Illumina 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.