Correlation Between Biofarm Bucure and IAR SA

Can any of the company-specific risk be diversified away by investing in both Biofarm Bucure and IAR SA 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 Biofarm Bucure and IAR SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Biofarm Bucure and IAR SA

0.49

Correlation Coefficient

Biofarm Bucure  IAR SA

Very weak diversification

The 3 months correlation between Biofarm and IAR is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Biofarm Bucure and IAR SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAR SA and Biofarm Bucure 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 Biofarm Bucure are associated (or correlated) with IAR SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAR SA has no effect on the direction of Biofarm Bucure i.e., Biofarm Bucure and IAR SA go up and down completely randomly.

Pair Corralation between Biofarm Bucure and IAR SA

Assuming the 90 days trading horizon Biofarm Bucure is expected to under-perform the IAR SA. But the stock apears to be less risky and, when comparing its historical volatility, Biofarm Bucure is 1.27 times less risky than IAR SA. The stock trades about -0.14 of its potential returns per unit of risk. The IAR SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,300  in IAR SA on September 5, 2024 and sell it today you would lose (30.00) from holding IAR SA or give up 2.31% of portfolio value over 90 days.

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

Biofarm Bucure  vs.  IAR SA

Biofarm Bucure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biofarm Bucure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

IAR SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAR SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IAR SA is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Biofarm Bucure and IAR SA

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

The idea behind Biofarm Bucure and IAR SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.