Correlation Between Probi AB and BioGaia AB

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

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

Diversification Opportunities for Probi AB and BioGaia AB

-0.26

Correlation Coefficient

Probi AB  BioGaia AB

Very good diversification

The 3 months correlation between Probi and BioGaia is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Probi AB and BioGaia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioGaia AB and Probi AB 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 Probi AB are associated (or correlated) with BioGaia AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioGaia AB has no effect on the direction of Probi AB i.e., Probi AB and BioGaia AB go up and down completely randomly.

Pair Corralation between Probi AB and BioGaia AB

Assuming the 90 days trading horizon Probi AB is expected to generate 4.05 times more return on investment than BioGaia AB. However, Probi AB is 4.05 times more volatile than BioGaia AB. It trades about 0.08 of its potential returns per unit of risk. BioGaia AB is currently generating about -0.09 per unit of risk. If you would invest  27,600  in Probi AB on September 3, 2024 and sell it today you would earn a total of  7,100  from holding Probi AB or generate 25.72% return on investment over 90 days.

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

Probi AB  vs.  BioGaia AB

Probi AB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Probi AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Probi AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

BioGaia AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BioGaia AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Probi AB and BioGaia AB

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

The idea behind Probi AB and BioGaia AB 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.