Correlation Between Level Biotechnology and Sports Gear

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

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

Diversification Opportunities for Level Biotechnology and Sports Gear

-0.62

Correlation Coefficient

Level Biotechnology  Sports Gear

Excellent diversification

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

Pair Corralation between Level Biotechnology and Sports Gear

Assuming the 90 days trading horizon Level Biotechnology is expected to generate 0.2 times more return on investment than Sports Gear. However, Level Biotechnology is 4.89 times less risky than Sports Gear. It trades about 0.11 of its potential returns per unit of risk. Sports Gear Co is currently generating about -0.05 per unit of risk. If you would invest  3,210  in Level Biotechnology on September 16, 2024 and sell it today you would earn a total of  45.00  from holding Level Biotechnology or generate 1.4% return on investment over 90 days.

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

Level Biotechnology  vs.  Sports Gear Co

Level Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sports Gear

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sports Gear Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sports Gear showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Level Biotechnology and Sports Gear

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

The idea behind Level Biotechnology and Sports Gear Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.