Correlation Between BIO Key and ATWEC Technologies

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

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

Diversification Opportunities for BIO Key and ATWEC Technologies

-0.11

Correlation Coefficient

BIO Key  ATWEC Technologies

Good diversification

The 3 months correlation between BIO and ATWEC is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BIO Key International and ATWEC Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATWEC Technologies and BIO Key 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 Key International are associated (or correlated) with ATWEC Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATWEC Technologies has no effect on the direction of BIO Key i.e., BIO Key and ATWEC Technologies go up and down completely randomly.

Pair Corralation between BIO Key and ATWEC Technologies

Given the investment horizon of 90 days BIO Key International is expected to under-perform the ATWEC Technologies. But the stock apears to be less risky and, when comparing its historical volatility, BIO Key International is 2.81 times less risky than ATWEC Technologies. The stock trades about -0.03 of its potential returns per unit of risk. The ATWEC Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.22  in ATWEC Technologies on September 23, 2024 and sell it today you would lose (0.11) from holding ATWEC Technologies or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

BIO Key International  vs.  ATWEC Technologies

BIO Key International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIO Key International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly conflicting basic indicators, BIO Key may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ATWEC Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATWEC Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, ATWEC Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BIO Key and ATWEC Technologies

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

The idea behind BIO Key International and ATWEC Technologies 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.