Correlation Between Bio Works and Profoto Holding

Can any of the company-specific risk be diversified away by investing in both Bio Works and Profoto Holding 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 Profoto Holding 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 Profoto Holding AB, you can compare the effects of market volatilities on Bio Works and Profoto Holding 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 Profoto Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bio Works and Profoto Holding.

Diversification Opportunities for Bio Works and Profoto Holding

0.46

Correlation Coefficient

Bio Works  Profoto Holding

Very weak diversification

The 3 months correlation between Bio and Profoto is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bio Works Technologies AB and Profoto Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profoto Holding AB 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 Profoto Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profoto Holding AB has no effect on the direction of Bio Works i.e., Bio Works and Profoto Holding go up and down completely randomly.

Pair Corralation between Bio Works and Profoto Holding

Assuming the 90 days trading horizon Bio Works Technologies AB is expected to generate 1.47 times more return on investment than Profoto Holding. However, Bio Works is 1.47 times more volatile than Profoto Holding AB. It trades about -0.09 of its potential returns per unit of risk. Profoto Holding AB is currently generating about -0.21 per unit of risk. If you would invest  115.00  in Bio Works Technologies AB on September 14, 2024 and sell it today you would lose (27.00) from holding Bio Works Technologies AB or give up 23.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Bio Works Technologies AB  vs.  Profoto Holding AB

Bio Works Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bio Works Technologies AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Profoto Holding AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Profoto Holding AB 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 basic indicators remain comparatively stable which may send shares a bit higher in January 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 Profoto Holding

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

The idea behind Bio Works Technologies AB and Profoto Holding AB 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.