Correlation Between Hofseth Biocare and PCI Biotech

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

By analyzing existing cross correlation between Hofseth Biocare ASA and PCI Biotech Holding, you can compare the effects of market volatilities on Hofseth Biocare and PCI Biotech 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 Hofseth Biocare with a short position of PCI Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hofseth Biocare and PCI Biotech.

Diversification Opportunities for Hofseth Biocare and PCI Biotech

0.68

Correlation Coefficient

Hofseth Biocare  PCI Biotech

Poor diversification

The 3 months correlation between Hofseth and PCI is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hofseth Biocare ASA and PCI Biotech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCI Biotech Holding and Hofseth Biocare 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 Hofseth Biocare ASA are associated (or correlated) with PCI Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCI Biotech Holding has no effect on the direction of Hofseth Biocare i.e., Hofseth Biocare and PCI Biotech go up and down completely randomly.

Pair Corralation between Hofseth Biocare and PCI Biotech

Assuming the 90 days trading horizon Hofseth Biocare ASA is expected to under-perform the PCI Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Hofseth Biocare ASA is 1.72 times less risky than PCI Biotech. The stock trades about -0.14 of its potential returns per unit of risk. The PCI Biotech Holding is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  199.00  in PCI Biotech Holding on September 2, 2024 and sell it today you would lose (49.00) from holding PCI Biotech Holding or give up 24.62% of portfolio value over 90 days.

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

Hofseth Biocare ASA  vs.  PCI Biotech Holding

Hofseth Biocare ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hofseth Biocare ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PCI Biotech Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PCI Biotech Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Hofseth Biocare and PCI Biotech

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

The idea behind Hofseth Biocare ASA and PCI Biotech Holding 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.