Correlation Between Sun Max and BRIM Biotechnology

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

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

Diversification Opportunities for Sun Max and BRIM Biotechnology

-0.3

Correlation Coefficient

Sun Max  BRIM Biotechnology

Very good diversification

The 3 months correlation between Sun and BRIM is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sun Max Tech and BRIM Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIM Biotechnology and Sun Max 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 Sun Max Tech are associated (or correlated) with BRIM Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIM Biotechnology has no effect on the direction of Sun Max i.e., Sun Max and BRIM Biotechnology go up and down completely randomly.

Pair Corralation between Sun Max and BRIM Biotechnology

Assuming the 90 days trading horizon Sun Max Tech is expected to generate 0.72 times more return on investment than BRIM Biotechnology. However, Sun Max Tech is 1.39 times less risky than BRIM Biotechnology. It trades about 0.02 of its potential returns per unit of risk. BRIM Biotechnology is currently generating about -0.24 per unit of risk. If you would invest  5,250  in Sun Max Tech on September 28, 2024 and sell it today you would earn a total of  30.00  from holding Sun Max Tech or generate 0.57% return on investment over 90 days.

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

Sun Max Tech  vs.  BRIM Biotechnology

Sun Max Tech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Max Tech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sun Max may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BRIM Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRIM Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Sun Max and BRIM Biotechnology

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

The idea behind Sun Max Tech and BRIM Biotechnology 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.