Correlation Between InnoTherapy and Microfriend
Can any of the company-specific risk be diversified away by investing in both InnoTherapy and Microfriend 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 InnoTherapy and Microfriend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InnoTherapy and Microfriend, you can compare the effects of market volatilities on InnoTherapy and Microfriend 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 InnoTherapy with a short position of Microfriend. Check out your portfolio center. Please also check ongoing floating volatility patterns of InnoTherapy and Microfriend.
Diversification Opportunities for InnoTherapy and Microfriend
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between InnoTherapy and Microfriend is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding InnoTherapy and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend and InnoTherapy 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 InnoTherapy are associated (or correlated) with Microfriend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microfriend has no effect on the direction of InnoTherapy i.e., InnoTherapy and Microfriend go up and down completely randomly.
Pair Corralation between InnoTherapy and Microfriend
Assuming the 90 days trading horizon InnoTherapy is expected to generate 0.65 times more return on investment than Microfriend. However, InnoTherapy is 1.55 times less risky than Microfriend. It trades about 0.01 of its potential returns per unit of risk. Microfriend is currently generating about -0.03 per unit of risk. If you would invest 896,000 in InnoTherapy on September 12, 2024 and sell it today you would lose (56,000) from holding InnoTherapy or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
InnoTherapy vs. Microfriend
Performance |
| Timeline |
| InnoTherapy |
| Microfriend |
InnoTherapy and Microfriend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InnoTherapy and Microfriend
The main advantage of trading using opposite InnoTherapy and Microfriend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InnoTherapy position performs unexpectedly, Microfriend 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 Microfriend will offset losses from the drop in Microfriend's long position.| InnoTherapy vs. Kolon Life Science | InnoTherapy vs. JETEMA Co | InnoTherapy vs. Aminologics CoLtd | InnoTherapy vs. Daihan Pharmaceutical CoLtd |
| Microfriend vs. Hansol Chemical Co | Microfriend vs. Kukdo Chemical Co | Microfriend vs. Jinro Distillers Co | Microfriend vs. InnoTherapy |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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