Correlation Between Biocept and Psychemedics

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

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

Diversification Opportunities for Biocept and Psychemedics

-0.29

Correlation Coefficient

Biocept  Psychemedics

Very good diversification

The 3 months correlation between Biocept and Psychemedics is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Biocept and Psychemedics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Psychemedics and Biocept 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 Biocept are associated (or correlated) with Psychemedics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Psychemedics has no effect on the direction of Biocept i.e., Biocept and Psychemedics go up and down completely randomly.

Pair Corralation between Biocept and Psychemedics

Given the investment horizon of 90 days Biocept is expected to under-perform the Psychemedics. In addition to that, Biocept is 2.19 times more volatile than Psychemedics. It trades about -0.15 of its total potential returns per unit of risk. Psychemedics is currently generating about -0.01 per unit of volatility. If you would invest  480.00  in Psychemedics on September 15, 2024 and sell it today you would lose (213.00) from holding Psychemedics or give up 44.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	29.09%
Values	Daily Returns

Biocept  vs.  Psychemedics

Biocept

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biocept has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Biocept is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Psychemedics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Psychemedics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Psychemedics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biocept and Psychemedics

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

The idea behind Biocept and Psychemedics 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.