Correlation Between SSC Security and BIO Key

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

By analyzing existing cross correlation between SSC Security Services and BIO Key International, you can compare the effects of market volatilities on SSC Security and BIO Key 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 SSC Security with a short position of BIO Key. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSC Security and BIO Key.

Diversification Opportunities for SSC Security and BIO Key

-0.21

Correlation Coefficient

SSC Security  BIO Key

Very good diversification

The 3 months correlation between SSC and BIO is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding SSC Security Services and BIO Key International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIO Key International and SSC Security 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 SSC Security Services are associated (or correlated) with BIO Key. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIO Key International has no effect on the direction of SSC Security i.e., SSC Security and BIO Key go up and down completely randomly.

Pair Corralation between SSC Security and BIO Key

Assuming the 90 days horizon SSC Security is expected to generate 6.51 times less return on investment than BIO Key. But when comparing it to its historical volatility, SSC Security Services is 24.04 times less risky than BIO Key. It trades about 0.13 of its potential returns per unit of risk. BIO Key International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  123.00  in BIO Key International on September 2, 2024 and sell it today you would lose (33.00) from holding BIO Key International or give up 26.83% of portfolio value over 90 days.

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

SSC Security Services  vs.  BIO Key International

SSC Security Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SSC Security Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SSC Security is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

BIO Key International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BIO Key International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, BIO Key demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SSC Security and BIO Key

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

The idea behind SSC Security Services and BIO Key International 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.