Correlation Between Fresh Tracks and BWV

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

By analyzing existing cross correlation between Fresh Tracks Therapeutics and BWV, you can compare the effects of market volatilities on Fresh Tracks and BWV 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 Fresh Tracks with a short position of BWV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Tracks and BWV.

Diversification Opportunities for Fresh Tracks and BWV

0.62

Correlation Coefficient

Fresh Tracks  BWV

Poor diversification

The 3 months correlation between Fresh and BWV is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Tracks Therapeutics and BWV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BWV and Fresh Tracks 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 Fresh Tracks Therapeutics are associated (or correlated) with BWV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BWV has no effect on the direction of Fresh Tracks i.e., Fresh Tracks and BWV go up and down completely randomly.

Pair Corralation between Fresh Tracks and BWV

Given the investment horizon of 90 days Fresh Tracks Therapeutics is expected to under-perform the BWV. In addition to that, Fresh Tracks is 1.2 times more volatile than BWV. It trades about -0.02 of its total potential returns per unit of risk. BWV is currently generating about 0.02 per unit of volatility. If you would invest  124.00  in BWV on September 3, 2024 and sell it today you would lose (12.00) from holding BWV or give up 9.68% of portfolio value over 90 days.

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

Fresh Tracks Therapeutics  vs.  BWV

Fresh Tracks Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresh Tracks Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Fresh Tracks is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BWV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BWV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, BWV is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fresh Tracks and BWV

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

The idea behind Fresh Tracks Therapeutics and BWV 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.