Correlation Between BioLight Life and Homebiogas

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

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

Diversification Opportunities for BioLight Life and Homebiogas

-0.64

Correlation Coefficient

BioLight Life  Homebiogas

Excellent diversification

The 3 months correlation between BioLight and Homebiogas is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding BioLight Life Sciences and Homebiogas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homebiogas and BioLight Life 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 BioLight Life Sciences are associated (or correlated) with Homebiogas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homebiogas has no effect on the direction of BioLight Life i.e., BioLight Life and Homebiogas go up and down completely randomly.

Pair Corralation between BioLight Life and Homebiogas

Assuming the 90 days trading horizon BioLight Life Sciences is expected to generate 2.34 times more return on investment than Homebiogas. However, BioLight Life is 2.34 times more volatile than Homebiogas. It trades about 0.06 of its potential returns per unit of risk. Homebiogas is currently generating about -0.41 per unit of risk. If you would invest  44,370  in BioLight Life Sciences on September 4, 2024 and sell it today you would earn a total of  3,830  from holding BioLight Life Sciences or generate 8.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.83%
Values	Daily Returns

BioLight Life Sciences  vs.  Homebiogas

BioLight Life Sciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BioLight Life Sciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BioLight Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Homebiogas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homebiogas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BioLight Life and Homebiogas

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

The idea behind BioLight Life Sciences and Homebiogas 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.