Correlation Between Danish Aerospace and BioPorto

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

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

Diversification Opportunities for Danish Aerospace and BioPorto

-0.37

Correlation Coefficient

Danish Aerospace  BioPorto

Very good diversification

The 3 months correlation between Danish and BioPorto is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Danish Aerospace and BioPorto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioPorto and Danish Aerospace 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 Danish Aerospace are associated (or correlated) with BioPorto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioPorto has no effect on the direction of Danish Aerospace i.e., Danish Aerospace and BioPorto go up and down completely randomly.

Pair Corralation between Danish Aerospace and BioPorto

Assuming the 90 days trading horizon Danish Aerospace is expected to generate 8.86 times more return on investment than BioPorto. However, Danish Aerospace is 8.86 times more volatile than BioPorto. It trades about 0.17 of its potential returns per unit of risk. BioPorto is currently generating about -0.06 per unit of risk. If you would invest  290.00  in Danish Aerospace on December 30, 2024 and sell it today you would earn a total of  760.00  from holding Danish Aerospace or generate 262.07% return on investment over 90 days.

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

Danish Aerospace  vs.  BioPorto

Danish Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Danish Aerospace are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Danish Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

BioPorto

Risk-Adjusted Performance

Very Weak

Over the last 90 days BioPorto has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Danish Aerospace and BioPorto

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

The idea behind Danish Aerospace and BioPorto 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.