Correlation Between Blue Line and BIO Key

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

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

Diversification Opportunities for Blue Line and BIO Key

0.28

Correlation Coefficient

Blue Line  BIO Key

Modest diversification

The 3 months correlation between Blue and BIO is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Blue Line Protection and BIO Key International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIO Key International and Blue Line 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 Blue Line Protection are associated (or correlated) with BIO Key. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIO Key International has no effect on the direction of Blue Line i.e., Blue Line and BIO Key go up and down completely randomly.

Pair Corralation between Blue Line and BIO Key

Given the investment horizon of 90 days Blue Line is expected to generate 12.06 times less return on investment than BIO Key. But when comparing it to its historical volatility, Blue Line Protection is 1.48 times less risky than BIO Key. It trades about 0.01 of its potential returns per unit of risk. BIO Key International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  95.00  in BIO Key International on December 23, 2024 and sell it today you would earn a total of  11.00  from holding BIO Key International or generate 11.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Blue Line Protection  vs.  BIO Key International

Blue Line Protection

Risk-Adjusted Performance

Very Weak

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

BIO Key International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BIO Key International are ranked lower than 5 (%) 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.

Pair Trading with Blue Line and BIO Key

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

The idea behind Blue Line Protection and BIO Key International 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.