Correlation Between Afarak Group and Biohit Oyj

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

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

Diversification Opportunities for Afarak Group and Biohit Oyj

0.62

Correlation Coefficient

Afarak Group  Biohit Oyj

Poor diversification

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

Pair Corralation between Afarak Group and Biohit Oyj

Assuming the 90 days trading horizon Afarak Group Oyj is expected to under-perform the Biohit Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Afarak Group Oyj is 1.89 times less risky than Biohit Oyj. The stock trades about -0.01 of its potential returns per unit of risk. The Biohit Oyj B is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Biohit Oyj B on December 2, 2024 and sell it today you would earn a total of  54.00  from holding Biohit Oyj B or generate 23.28% return on investment over 90 days.

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

Afarak Group Oyj  vs.  Biohit Oyj B

Afarak Group Oyj

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Afarak Group Oyj are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Afarak Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Biohit Oyj B

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biohit Oyj B are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Biohit Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Afarak Group and Biohit Oyj

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

The idea behind Afarak Group Oyj and Biohit Oyj B 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.