Correlation Between Orexo AB and BioArctic

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

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

Diversification Opportunities for Orexo AB and BioArctic

0.17

Correlation Coefficient

Orexo AB  BioArctic

Average diversification

The 3 months correlation between Orexo and BioArctic is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Orexo AB and BioArctic AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioArctic AB and Orexo AB 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 Orexo AB are associated (or correlated) with BioArctic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioArctic AB has no effect on the direction of Orexo AB i.e., Orexo AB and BioArctic go up and down completely randomly.

Pair Corralation between Orexo AB and BioArctic

Assuming the 90 days trading horizon Orexo AB is expected to generate 0.89 times more return on investment than BioArctic. However, Orexo AB is 1.12 times less risky than BioArctic. It trades about 0.09 of its potential returns per unit of risk. BioArctic AB is currently generating about 0.03 per unit of risk. If you would invest  1,498  in Orexo AB on September 14, 2024 and sell it today you would earn a total of  322.00  from holding Orexo AB or generate 21.5% return on investment over 90 days.

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

Orexo AB  vs.  BioArctic AB

Orexo AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orexo AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Orexo AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

BioArctic AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BioArctic AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, BioArctic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Orexo AB and BioArctic

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

The idea behind Orexo AB and BioArctic AB 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.