Correlation Between BIO Key and Bridger Aerospace

Can any of the company-specific risk be diversified away by investing in both BIO Key and Bridger Aerospace 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 Bridger Aerospace 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 Bridger Aerospace Group, you can compare the effects of market volatilities on BIO Key and Bridger Aerospace 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 Bridger Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of BIO Key and Bridger Aerospace.

Diversification Opportunities for BIO Key and Bridger Aerospace

0.54

Correlation Coefficient

BIO Key  Bridger Aerospace

Very weak diversification

The 3 months correlation between BIO and Bridger is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding BIO Key International and Bridger Aerospace Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridger Aerospace 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 Bridger Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridger Aerospace has no effect on the direction of BIO Key i.e., BIO Key and Bridger Aerospace go up and down completely randomly.

Pair Corralation between BIO Key and Bridger Aerospace

Given the investment horizon of 90 days BIO Key is expected to generate 1.95 times less return on investment than Bridger Aerospace. But when comparing it to its historical volatility, BIO Key International is 1.25 times less risky than Bridger Aerospace. It trades about 0.06 of its potential returns per unit of risk. Bridger Aerospace Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5.10  in Bridger Aerospace Group on December 25, 2024 and sell it today you would earn a total of  0.90  from holding Bridger Aerospace Group or generate 17.65% return on investment over 90 days.

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

BIO Key International  vs.  Bridger Aerospace Group

BIO Key International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BIO Key International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, BIO Key demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bridger Aerospace

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bridger Aerospace Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Bridger Aerospace showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BIO Key and Bridger Aerospace

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

The idea behind BIO Key International and Bridger Aerospace Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.