Correlation Between Biomerica and Co Diagnostics

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

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

Diversification Opportunities for Biomerica and Co Diagnostics

-0.4

Correlation Coefficient

Biomerica  Co Diagnostics

Very good diversification

The 3 months correlation between Biomerica and CODX is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Biomerica and Co Diagnostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Co Diagnostics and Biomerica 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 Biomerica are associated (or correlated) with Co Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Co Diagnostics has no effect on the direction of Biomerica i.e., Biomerica and Co Diagnostics go up and down completely randomly.

Pair Corralation between Biomerica and Co Diagnostics

Given the investment horizon of 90 days Biomerica is expected to generate 2.4 times more return on investment than Co Diagnostics. However, Biomerica is 2.4 times more volatile than Co Diagnostics. It trades about 0.12 of its potential returns per unit of risk. Co Diagnostics is currently generating about -0.16 per unit of risk. If you would invest  31.00  in Biomerica on December 29, 2024 and sell it today you would earn a total of  27.00  from holding Biomerica or generate 87.1% return on investment over 90 days.

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

Biomerica  vs.  Co Diagnostics

Biomerica

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biomerica are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Biomerica sustained solid returns over the last few months and may actually be approaching a breakup point.

Co Diagnostics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Co Diagnostics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Biomerica and Co Diagnostics

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

The idea behind Biomerica and Co Diagnostics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.