Correlation Between Australis Capital and Biome Grow

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

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

Diversification Opportunities for Australis Capital and Biome Grow

-0.07

Correlation Coefficient

Australis Capital  Biome Grow

Good diversification

The 3 months correlation between Australis and Biome is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Australis Capital and Biome Grow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biome Grow and Australis Capital 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 Australis Capital are associated (or correlated) with Biome Grow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biome Grow has no effect on the direction of Australis Capital i.e., Australis Capital and Biome Grow go up and down completely randomly.

Pair Corralation between Australis Capital and Biome Grow

Assuming the 90 days horizon Australis Capital is expected to generate 2.64 times more return on investment than Biome Grow. However, Australis Capital is 2.64 times more volatile than Biome Grow. It trades about 0.09 of its potential returns per unit of risk. Biome Grow is currently generating about 0.1 per unit of risk. If you would invest  4.40  in Australis Capital on September 29, 2024 and sell it today you would lose (4.39) from holding Australis Capital or give up 99.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Australis Capital  vs.  Biome Grow

Australis Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australis Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Biome Grow

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biome Grow are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Biome Grow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australis Capital and Biome Grow

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

The idea behind Australis Capital and Biome Grow 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.