Correlation Between Biotron and ChitogenX

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

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

Diversification Opportunities for Biotron and ChitogenX

-0.09

Correlation Coefficient

Biotron  ChitogenX

Good diversification

The 3 months correlation between Biotron and ChitogenX is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Biotron Limited and ChitogenX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChitogenX and Biotron 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 Biotron Limited are associated (or correlated) with ChitogenX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChitogenX has no effect on the direction of Biotron i.e., Biotron and ChitogenX go up and down completely randomly.

Pair Corralation between Biotron and ChitogenX

Assuming the 90 days horizon Biotron Limited is expected to generate 1.92 times more return on investment than ChitogenX. However, Biotron is 1.92 times more volatile than ChitogenX. It trades about 0.08 of its potential returns per unit of risk. ChitogenX is currently generating about 0.1 per unit of risk. If you would invest  1.25  in Biotron Limited on December 1, 2024 and sell it today you would lose (0.75) from holding Biotron Limited or give up 60.0% of portfolio value over 90 days.

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

Biotron Limited  vs.  ChitogenX

Biotron Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Biotron Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Biotron reported solid returns over the last few months and may actually be approaching a breakup point.

ChitogenX

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChitogenX are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ChitogenX reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biotron and ChitogenX

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

The idea behind Biotron Limited and ChitogenX 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.