Correlation Between Body and Willow Biosciences

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

By analyzing existing cross correlation between Body And Mind and Willow Biosciences, you can compare the effects of market volatilities on Body and Willow Biosciences 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 Body with a short position of Willow Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Body and Willow Biosciences.

Diversification Opportunities for Body and Willow Biosciences

-0.12

Correlation Coefficient

Body  Willow Biosciences

Good diversification

The 3 months correlation between Body and Willow is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Body And Mind and Willow Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willow Biosciences and Body 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 Body And Mind are associated (or correlated) with Willow Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willow Biosciences has no effect on the direction of Body i.e., Body and Willow Biosciences go up and down completely randomly.

Pair Corralation between Body and Willow Biosciences

Given the investment horizon of 90 days Body And Mind is expected to generate 1.73 times more return on investment than Willow Biosciences. However, Body is 1.73 times more volatile than Willow Biosciences. It trades about 0.07 of its potential returns per unit of risk. Willow Biosciences is currently generating about -0.06 per unit of risk. If you would invest  1.23  in Body And Mind on December 27, 2024 and sell it today you would lose (0.45) from holding Body And Mind or give up 36.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	56.67%
Values	Daily Returns

Body And Mind  vs.  Willow Biosciences

Body And Mind

Risk-Adjusted Performance

Modest

Over the last 90 days Body And Mind has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively fragile primary indicators, Body revealed solid returns over the last few months and may actually be approaching a breakup point.

Willow Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willow Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Body and Willow Biosciences

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

The idea behind Body And Mind and Willow Biosciences 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.