Correlation Between Energy and Bion Environmental

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

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

Diversification Opportunities for Energy and Bion Environmental

0.58

Correlation Coefficient

Energy  Bion Environmental

Very weak diversification

The 3 months correlation between Energy and Bion is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Water and Bion Environmental Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bion Environmental and Energy 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 Energy and Water are associated (or correlated) with Bion Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bion Environmental has no effect on the direction of Energy i.e., Energy and Bion Environmental go up and down completely randomly.

Pair Corralation between Energy and Bion Environmental

Given the investment horizon of 90 days Energy and Water is expected to generate 2.06 times more return on investment than Bion Environmental. However, Energy is 2.06 times more volatile than Bion Environmental Technologies. It trades about 0.01 of its potential returns per unit of risk. Bion Environmental Technologies is currently generating about -0.03 per unit of risk. If you would invest  0.38  in Energy and Water on December 28, 2024 and sell it today you would lose (0.16) from holding Energy and Water or give up 42.11% of portfolio value over 90 days.

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

Energy and Water  vs.  Bion Environmental Technologie

Energy and Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy and Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bion Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bion Environmental Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Energy and Bion Environmental

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

The idea behind Energy and Water and Bion Environmental 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.