Correlation Between Plymouth Rock and BIO Key

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

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

Diversification Opportunities for Plymouth Rock and BIO Key

-0.41

Correlation Coefficient

Plymouth Rock  BIO Key

Very good diversification

The 3 months correlation between Plymouth and BIO is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Plymouth Rock Technologies and BIO Key International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIO Key International and Plymouth Rock 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 Plymouth Rock Technologies are associated (or correlated) with BIO Key. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIO Key International has no effect on the direction of Plymouth Rock i.e., Plymouth Rock and BIO Key go up and down completely randomly.

Pair Corralation between Plymouth Rock and BIO Key

Assuming the 90 days horizon Plymouth Rock Technologies is expected to generate 1.12 times more return on investment than BIO Key. However, Plymouth Rock is 1.12 times more volatile than BIO Key International. It trades about 0.05 of its potential returns per unit of risk. BIO Key International is currently generating about -0.01 per unit of risk. If you would invest  3.70  in Plymouth Rock Technologies on October 11, 2024 and sell it today you would earn a total of  0.30  from holding Plymouth Rock Technologies or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	25.81%
Values	Daily Returns

Plymouth Rock Technologies  vs.  BIO Key International

Plymouth Rock Techno

Risk-Adjusted Performance

0 of 100

Very Weak

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

BIO Key International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BIO Key International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, BIO Key demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plymouth Rock and BIO Key

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

The idea behind Plymouth Rock Technologies and BIO Key International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.