Correlation Between BWV and ContraFect Corp

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

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

Diversification Opportunities for BWV and ContraFect Corp

-0.1

Correlation Coefficient

BWV  ContraFect Corp

Good diversification

The 3 months correlation between BWV and ContraFect is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BWV and ContraFect Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ContraFect Corp and BWV 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 BWV are associated (or correlated) with ContraFect Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ContraFect Corp has no effect on the direction of BWV i.e., BWV and ContraFect Corp go up and down completely randomly.

Pair Corralation between BWV and ContraFect Corp

Considering the 90-day investment horizon BWV is expected to generate 0.41 times more return on investment than ContraFect Corp. However, BWV is 2.43 times less risky than ContraFect Corp. It trades about 0.02 of its potential returns per unit of risk. ContraFect Corp is currently generating about -0.03 per unit of risk. If you would invest  124.00  in BWV on September 3, 2024 and sell it today you would lose (12.00) from holding BWV or give up 9.68% of portfolio value over 90 days.

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

BWV  vs.  ContraFect Corp

BWV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BWV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, BWV is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ContraFect Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BWV and ContraFect Corp

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

The idea behind BWV and ContraFect Corp 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.