Correlation Between Bio Works and MTI Investment

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

By analyzing existing cross correlation between Bio Works Technologies AB and MTI Investment SE, you can compare the effects of market volatilities on Bio Works and MTI Investment 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 Bio Works with a short position of MTI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bio Works and MTI Investment.

Diversification Opportunities for Bio Works and MTI Investment

-0.1

Correlation Coefficient

Bio Works  MTI Investment

Good diversification

The 3 months correlation between Bio and MTI is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bio Works Technologies AB and MTI Investment SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTI Investment SE and Bio Works 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 Bio Works Technologies AB are associated (or correlated) with MTI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTI Investment SE has no effect on the direction of Bio Works i.e., Bio Works and MTI Investment go up and down completely randomly.

Pair Corralation between Bio Works and MTI Investment

Assuming the 90 days trading horizon Bio Works Technologies AB is expected to generate 1.21 times more return on investment than MTI Investment. However, Bio Works is 1.21 times more volatile than MTI Investment SE. It trades about 0.2 of its potential returns per unit of risk. MTI Investment SE is currently generating about -0.06 per unit of risk. If you would invest  81.00  in Bio Works Technologies AB on December 26, 2024 and sell it today you would earn a total of  59.00  from holding Bio Works Technologies AB or generate 72.84% return on investment over 90 days.

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

Bio Works Technologies AB  vs.  MTI Investment SE

Bio Works Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bio Works Technologies AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Bio Works sustained solid returns over the last few months and may actually be approaching a breakup point.

MTI Investment SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days MTI Investment SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bio Works and MTI Investment

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

The idea behind Bio Works Technologies AB and MTI Investment SE 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.