Correlation Between EMBASSY OFFICE and Biofil Chemicals

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

By analyzing existing cross correlation between EMBASSY OFFICE PARKS and Biofil Chemicals Pharmaceuticals, you can compare the effects of market volatilities on EMBASSY OFFICE and Biofil Chemicals 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 EMBASSY OFFICE with a short position of Biofil Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMBASSY OFFICE and Biofil Chemicals.

Diversification Opportunities for EMBASSY OFFICE and Biofil Chemicals

0.37

Correlation Coefficient

EMBASSY OFFICE  Biofil Chemicals

Weak diversification

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

Pair Corralation between EMBASSY OFFICE and Biofil Chemicals

Assuming the 90 days trading horizon EMBASSY OFFICE is expected to generate 13.83 times less return on investment than Biofil Chemicals. But when comparing it to its historical volatility, EMBASSY OFFICE PARKS is 2.17 times less risky than Biofil Chemicals. It trades about 0.01 of its potential returns per unit of risk. Biofil Chemicals Pharmaceuticals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,974  in Biofil Chemicals Pharmaceuticals on September 20, 2024 and sell it today you would earn a total of  146.00  from holding Biofil Chemicals Pharmaceuticals or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

EMBASSY OFFICE PARKS  vs.  Biofil Chemicals Pharmaceutica

EMBASSY OFFICE PARKS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Biofil Chemicals Pha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biofil Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with EMBASSY OFFICE and Biofil Chemicals

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

The idea behind EMBASSY OFFICE PARKS and Biofil Chemicals Pharmaceuticals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .