Correlation Between Premium Brands and BioAdaptives

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

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

Diversification Opportunities for Premium Brands and BioAdaptives

-0.84

Correlation Coefficient

Premium Brands  BioAdaptives

Pay attention - limited upside

The 3 months correlation between Premium and BioAdaptives is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Premium Brands Holdings and BioAdaptives in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioAdaptives and Premium Brands 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 Premium Brands Holdings are associated (or correlated) with BioAdaptives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioAdaptives has no effect on the direction of Premium Brands i.e., Premium Brands and BioAdaptives go up and down completely randomly.

Pair Corralation between Premium Brands and BioAdaptives

Assuming the 90 days horizon Premium Brands is expected to generate 163.19 times less return on investment than BioAdaptives. But when comparing it to its historical volatility, Premium Brands Holdings is 17.55 times less risky than BioAdaptives. It trades about 0.01 of its potential returns per unit of risk. BioAdaptives is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.10  in BioAdaptives on September 28, 2024 and sell it today you would earn a total of  10.90  from holding BioAdaptives or generate 10900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	73.71%
Values	Daily Returns

Premium Brands Holdings  vs.  BioAdaptives

Premium Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BioAdaptives

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BioAdaptives are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, BioAdaptives unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premium Brands and BioAdaptives

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

The idea behind Premium Brands Holdings and BioAdaptives 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.