Correlation Between Biotron and Small Pharma

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

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

Diversification Opportunities for Biotron and Small Pharma

0.0

Correlation Coefficient

Biotron  Small Pharma

Pay attention - limited upside

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

Pair Corralation between Biotron and Small Pharma

If you would invest  0.98  in Biotron Limited on December 29, 2024 and sell it today you would lose (0.71) from holding Biotron Limited or give up 72.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Biotron Limited  vs.  Small Pharma

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.

Small Pharma

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Biotron and Small Pharma

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

The idea behind Biotron Limited and Small Pharma 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.