Correlation Between Boiron SA and Bains Mer

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

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

Diversification Opportunities for Boiron SA and Bains Mer

0.22

Correlation Coefficient

Boiron SA  Bains Mer

Modest diversification

The 3 months correlation between Boiron and Bains is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Boiron SA and Bains Mer Monaco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bains Mer Monaco and Boiron SA 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 Boiron SA are associated (or correlated) with Bains Mer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bains Mer Monaco has no effect on the direction of Boiron SA i.e., Boiron SA and Bains Mer go up and down completely randomly.

Pair Corralation between Boiron SA and Bains Mer

Assuming the 90 days trading horizon Boiron SA is expected to under-perform the Bains Mer. In addition to that, Boiron SA is 1.48 times more volatile than Bains Mer Monaco. It trades about -0.03 of its total potential returns per unit of risk. Bains Mer Monaco is currently generating about -0.02 per unit of volatility. If you would invest  10,200  in Bains Mer Monaco on November 30, 2024 and sell it today you would lose (200.00) from holding Bains Mer Monaco or give up 1.96% of portfolio value over 90 days.

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

Boiron SA  vs.  Bains Mer Monaco

Boiron SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boiron SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Boiron SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bains Mer Monaco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bains Mer Monaco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bains Mer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boiron SA and Bains Mer

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

The idea behind Boiron SA and Bains Mer Monaco 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.