Correlation Between Strategic Investments and Bactiquant

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

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

Diversification Opportunities for Strategic Investments and Bactiquant

0.43

Correlation Coefficient

Strategic Investments  Bactiquant

Very weak diversification

The 3 months correlation between Strategic and Bactiquant is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and Bactiquant AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bactiquant AS and Strategic Investments 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 Strategic Investments AS are associated (or correlated) with Bactiquant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bactiquant AS has no effect on the direction of Strategic Investments i.e., Strategic Investments and Bactiquant go up and down completely randomly.

Pair Corralation between Strategic Investments and Bactiquant

Assuming the 90 days trading horizon Strategic Investments AS is expected to generate 0.57 times more return on investment than Bactiquant. However, Strategic Investments AS is 1.75 times less risky than Bactiquant. It trades about 0.03 of its potential returns per unit of risk. Bactiquant AS is currently generating about -0.09 per unit of risk. If you would invest  105.00  in Strategic Investments AS on September 2, 2024 and sell it today you would earn a total of  3.00  from holding Strategic Investments AS or generate 2.86% return on investment over 90 days.

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

Strategic Investments AS  vs.  Bactiquant AS

Strategic Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Investments AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategic Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bactiquant AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bactiquant AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Strategic Investments and Bactiquant

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

The idea behind Strategic Investments AS and Bactiquant AS 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.