Correlation Between Biotron and Nascent Biotech

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

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

Diversification Opportunities for Biotron and Nascent Biotech

-0.68

Correlation Coefficient

Biotron  Nascent Biotech

Excellent diversification

The 3 months correlation between Biotron and Nascent is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Biotron Limited and Nascent Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nascent Biotech 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 Nascent Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nascent Biotech has no effect on the direction of Biotron i.e., Biotron and Nascent Biotech go up and down completely randomly.

Pair Corralation between Biotron and Nascent Biotech

Assuming the 90 days horizon Biotron is expected to generate 3.33 times less return on investment than Nascent Biotech. But when comparing it to its historical volatility, Biotron Limited is 2.12 times less risky than Nascent Biotech. It trades about 0.11 of its potential returns per unit of risk. Nascent Biotech is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5.06  in Nascent Biotech on December 3, 2024 and sell it today you would lose (4.31) from holding Nascent Biotech or give up 85.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.35%
Values	Daily Returns

Biotron Limited  vs.  Nascent Biotech

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.

Nascent Biotech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nascent Biotech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Nascent Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biotron and Nascent Biotech

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

The idea behind Biotron Limited and Nascent Biotech 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.