Correlation Between Life Science and Bodycote PLC
Can any of the company-specific risk be diversified away by investing in both Life Science and Bodycote PLC 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 Life Science and Bodycote PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Science REIT and Bodycote PLC, you can compare the effects of market volatilities on Life Science and Bodycote PLC 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 Life Science with a short position of Bodycote PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Science and Bodycote PLC.
Diversification Opportunities for Life Science and Bodycote PLC
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Life and Bodycote is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Life Science REIT and Bodycote PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodycote PLC and Life Science 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 Life Science REIT are associated (or correlated) with Bodycote PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodycote PLC has no effect on the direction of Life Science i.e., Life Science and Bodycote PLC go up and down completely randomly.
Pair Corralation between Life Science and Bodycote PLC
Assuming the 90 days trading horizon Life Science REIT is expected to generate 1.17 times more return on investment than Bodycote PLC. However, Life Science is 1.17 times more volatile than Bodycote PLC. It trades about 0.16 of its potential returns per unit of risk. Bodycote PLC is currently generating about 0.06 per unit of risk. If you would invest 3,140 in Life Science REIT on September 25, 2024 and sell it today you would earn a total of 740.00 from holding Life Science REIT or generate 23.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 98.46% |
Values | Daily Returns |
Life Science REIT vs. Bodycote PLC
Performance |
Timeline |
Life Science REIT |
Bodycote PLC |
Life Science and Bodycote PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Life Science and Bodycote PLC
The main advantage of trading using opposite Life Science and Bodycote PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Science position performs unexpectedly, Bodycote PLC 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 Bodycote PLC will offset losses from the drop in Bodycote PLC's long position.Life Science vs. Derwent London PLC | Life Science vs. Hammerson PLC | Life Science vs. Workspace Group PLC | Life Science vs. Supermarket Income REIT |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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