Correlation Between Genolution and ABL Bio

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

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

Diversification Opportunities for Genolution and ABL Bio

0.69

Correlation Coefficient

Genolution  ABL Bio

Poor diversification

The 3 months correlation between Genolution and ABL is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Genolution and ABL Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABL Bio and Genolution 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 Genolution are associated (or correlated) with ABL Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABL Bio has no effect on the direction of Genolution i.e., Genolution and ABL Bio go up and down completely randomly.

Pair Corralation between Genolution and ABL Bio

Assuming the 90 days trading horizon Genolution is expected to under-perform the ABL Bio. But the stock apears to be less risky and, when comparing its historical volatility, Genolution is 1.87 times less risky than ABL Bio. The stock trades about -0.22 of its potential returns per unit of risk. The ABL Bio is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,220,000  in ABL Bio on October 5, 2024 and sell it today you would lose (245,000) from holding ABL Bio or give up 7.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Genolution  vs.  ABL Bio

Genolution

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genolution 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.

ABL Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABL Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ABL Bio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Genolution and ABL Bio

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

The idea behind Genolution and ABL Bio 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.