Correlation Between BioGaia AB and Byggmax Group

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

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

Diversification Opportunities for BioGaia AB and Byggmax Group

0.04

Correlation Coefficient

BioGaia AB  Byggmax Group

Significant diversification

The 3 months correlation between BioGaia and Byggmax is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BioGaia AB and Byggmax Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byggmax Group AB and BioGaia 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 BioGaia AB are associated (or correlated) with Byggmax Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byggmax Group AB has no effect on the direction of BioGaia AB i.e., BioGaia AB and Byggmax Group go up and down completely randomly.

Pair Corralation between BioGaia AB and Byggmax Group

Assuming the 90 days trading horizon BioGaia AB is expected to generate 0.79 times more return on investment than Byggmax Group. However, BioGaia AB is 1.26 times less risky than Byggmax Group. It trades about 0.03 of its potential returns per unit of risk. Byggmax Group AB is currently generating about 0.01 per unit of risk. If you would invest  8,505  in BioGaia AB on September 3, 2024 and sell it today you would earn a total of  2,195  from holding BioGaia AB or generate 25.81% return on investment over 90 days.

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

BioGaia AB  vs.  Byggmax Group AB

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.

Byggmax Group AB

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with BioGaia AB and Byggmax Group

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

The idea behind BioGaia AB and Byggmax Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.