Correlation Between High Tech and InnoTherapy
Can any of the company-specific risk be diversified away by investing in both High Tech and InnoTherapy 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 High Tech and InnoTherapy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Tech Pharm and InnoTherapy, you can compare the effects of market volatilities on High Tech and InnoTherapy 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 High Tech with a short position of InnoTherapy. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Tech and InnoTherapy.
Diversification Opportunities for High Tech and InnoTherapy
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between High and InnoTherapy is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding High Tech Pharm and InnoTherapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoTherapy and High Tech 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 High Tech Pharm are associated (or correlated) with InnoTherapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoTherapy has no effect on the direction of High Tech i.e., High Tech and InnoTherapy go up and down completely randomly.
Pair Corralation between High Tech and InnoTherapy
Assuming the 90 days trading horizon High Tech Pharm is expected to under-perform the InnoTherapy. In addition to that, High Tech is 1.17 times more volatile than InnoTherapy. It trades about -0.11 of its total potential returns per unit of risk. InnoTherapy is currently generating about 0.1 per unit of volatility. If you would invest 837,000 in InnoTherapy on August 31, 2024 and sell it today you would earn a total of 34,000 from holding InnoTherapy or generate 4.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Tech Pharm vs. InnoTherapy
Performance |
| Timeline |
| High Tech Pharm |
| InnoTherapy |
High Tech and InnoTherapy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Tech and InnoTherapy
The main advantage of trading using opposite High Tech and InnoTherapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Tech position performs unexpectedly, InnoTherapy 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 InnoTherapy will offset losses from the drop in InnoTherapy's long position.| High Tech vs. Sungchang Autotech Co | High Tech vs. Raontech | High Tech vs. Orbitech Co | High Tech vs. Solution Advanced Technology |
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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.
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