Correlation Between BWV and MediciNova

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

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

Diversification Opportunities for BWV and MediciNova

0.72

Correlation Coefficient

BWV  MediciNova

Poor diversification

The 3 months correlation between BWV and MediciNova is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BWV and MediciNova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediciNova 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 MediciNova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediciNova has no effect on the direction of BWV i.e., BWV and MediciNova go up and down completely randomly.

Pair Corralation between BWV and MediciNova

If you would invest  195.00  in MediciNova on September 21, 2024 and sell it today you would earn a total of  21.00  from holding MediciNova or generate 10.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

BWV  vs.  MediciNova

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.

MediciNova

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MediciNova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BWV and MediciNova

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

The idea behind BWV and MediciNova 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.