Correlation Between Biome Grow and Flowr Corp

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

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

Diversification Opportunities for Biome Grow and Flowr Corp

0.0

Correlation Coefficient

Biome Grow  Flowr Corp

Pay attention - limited upside

The 3 months correlation between Biome and Flowr is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Biome Grow and Flowr Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowr Corp and Biome Grow 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 Biome Grow are associated (or correlated) with Flowr Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowr Corp has no effect on the direction of Biome Grow i.e., Biome Grow and Flowr Corp go up and down completely randomly.

Pair Corralation between Biome Grow and Flowr Corp

Assuming the 90 days horizon Biome Grow is expected to generate 2.29 times less return on investment than Flowr Corp. But when comparing it to its historical volatility, Biome Grow is 2.63 times less risky than Flowr Corp. It trades about 0.1 of its potential returns per unit of risk. Flowr Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Flowr Corp on September 29, 2024 and sell it today you would lose (1.90) from holding Flowr Corp or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	82.33%
Values	Daily Returns

Biome Grow  vs.  Flowr Corp

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.

Flowr Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flowr Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Flowr Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Biome Grow and Flowr Corp

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

The idea behind Biome Grow and Flowr Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.