Correlation Between Assa Abloy and BIO Key

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

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

Diversification Opportunities for Assa Abloy and BIO Key

-0.41

Correlation Coefficient

Assa Abloy  BIO Key

Very good diversification

The 3 months correlation between Assa and BIO is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Assa Abloy AB 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 Assa Abloy 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 Assa Abloy AB 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 Assa Abloy i.e., Assa Abloy and BIO Key go up and down completely randomly.

Pair Corralation between Assa Abloy and BIO Key

Assuming the 90 days horizon Assa Abloy is expected to generate 27.53 times less return on investment than BIO Key. But when comparing it to its historical volatility, Assa Abloy AB is 9.14 times less risky than BIO Key. It trades about 0.03 of its potential returns per unit of risk. BIO Key International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  92.00  in BIO Key International on December 17, 2024 and sell it today you would earn a total of  28.00  from holding BIO Key International or generate 30.43% return on investment over 90 days.

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

Assa Abloy AB  vs.  BIO Key International

Assa Abloy AB

Risk-Adjusted Performance

Weak

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

BIO Key International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BIO Key International are ranked lower than 7 (%) 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 Assa Abloy and BIO Key

The main advantage of trading using opposite Assa Abloy and BIO Key positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Assa Abloy 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 Assa Abloy AB 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.