Correlation Between CSL and Biostem Technologies

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

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

Diversification Opportunities for CSL and Biostem Technologies

0.59

Correlation Coefficient

CSL  Biostem Technologies

Very weak diversification

The 3 months correlation between CSL and Biostem is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited and Biostem Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biostem Technologies and CSL 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 CSL Limited are associated (or correlated) with Biostem Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biostem Technologies has no effect on the direction of CSL i.e., CSL and Biostem Technologies go up and down completely randomly.

Pair Corralation between CSL and Biostem Technologies

Assuming the 90 days horizon CSL Limited is expected to generate 0.71 times more return on investment than Biostem Technologies. However, CSL Limited is 1.4 times less risky than Biostem Technologies. It trades about -0.01 of its potential returns per unit of risk. Biostem Technologies is currently generating about -0.04 per unit of risk. If you would invest  16,720  in CSL Limited on December 25, 2024 and sell it today you would lose (1,058) from holding CSL Limited or give up 6.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

CSL Limited  vs.  Biostem Technologies

CSL Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, CSL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Biostem Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biostem Technologies 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CSL and Biostem Technologies

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

The idea behind CSL Limited and Biostem Technologies 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.