Correlation Between Sajo Seafood and InnoTherapy

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

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

Diversification Opportunities for Sajo Seafood and InnoTherapy

-0.14

Correlation Coefficient

Sajo Seafood  InnoTherapy

Good diversification

The 3 months correlation between Sajo and InnoTherapy is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sajo Seafood and InnoTherapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoTherapy and Sajo Seafood 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 Sajo Seafood 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 Sajo Seafood i.e., Sajo Seafood and InnoTherapy go up and down completely randomly.

Pair Corralation between Sajo Seafood and InnoTherapy

Assuming the 90 days trading horizon Sajo Seafood is expected to under-perform the InnoTherapy. In addition to that, Sajo Seafood is 1.81 times more volatile than InnoTherapy. It trades about -0.17 of its total potential returns per unit of risk. InnoTherapy is currently generating about 0.09 per unit of volatility. If you would invest  870,000  in InnoTherapy on October 25, 2024 and sell it today you would earn a total of  86,000  from holding InnoTherapy or generate 9.89% return on investment over 90 days.

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

Sajo Seafood  vs.  InnoTherapy

Sajo Seafood

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sajo Seafood has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

InnoTherapy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InnoTherapy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, InnoTherapy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sajo Seafood and InnoTherapy

The main advantage of trading using opposite Sajo Seafood and InnoTherapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sajo Seafood 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.

The idea behind Sajo Seafood and InnoTherapy 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.