Correlation Between HLB Pharmaceutical and InnoTherapy

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

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

Diversification Opportunities for HLB Pharmaceutical and InnoTherapy

0.44

Correlation Coefficient

HLB Pharmaceutical  InnoTherapy

Very weak diversification

The 3 months correlation between HLB and InnoTherapy is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding HLB Pharmaceutical Co and InnoTherapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoTherapy and HLB Pharmaceutical 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 HLB Pharmaceutical Co 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 HLB Pharmaceutical i.e., HLB Pharmaceutical and InnoTherapy go up and down completely randomly.

Pair Corralation between HLB Pharmaceutical and InnoTherapy

Assuming the 90 days trading horizon HLB Pharmaceutical Co is expected to generate 1.59 times more return on investment than InnoTherapy. However, HLB Pharmaceutical is 1.59 times more volatile than InnoTherapy. It trades about 0.12 of its potential returns per unit of risk. InnoTherapy is currently generating about 0.06 per unit of risk. If you would invest  2,250,000  in HLB Pharmaceutical Co on November 28, 2024 and sell it today you would earn a total of  440,000  from holding HLB Pharmaceutical Co or generate 19.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

HLB Pharmaceutical Co  vs.  InnoTherapy

HLB Pharmaceutical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HLB Pharmaceutical Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HLB Pharmaceutical sustained solid returns over the last few months and may actually be approaching a breakup point.

InnoTherapy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InnoTherapy are ranked lower than 4 (%) 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 March 2025.

Pair Trading with HLB Pharmaceutical and InnoTherapy

The main advantage of trading using opposite HLB Pharmaceutical and InnoTherapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HLB Pharmaceutical 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 HLB Pharmaceutical Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.