Correlation Between Transcend Information and GenMont Biotech

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

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

Diversification Opportunities for Transcend Information and GenMont Biotech

0.85

Correlation Coefficient

Transcend Information  GenMont Biotech

Very poor diversification

The 3 months correlation between Transcend and GenMont is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Transcend Information and GenMont Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GenMont Biotech and Transcend Information 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 Transcend Information are associated (or correlated) with GenMont Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GenMont Biotech has no effect on the direction of Transcend Information i.e., Transcend Information and GenMont Biotech go up and down completely randomly.

Pair Corralation between Transcend Information and GenMont Biotech

Assuming the 90 days trading horizon Transcend Information is expected to generate 1.25 times less return on investment than GenMont Biotech. But when comparing it to its historical volatility, Transcend Information is 1.02 times less risky than GenMont Biotech. It trades about 0.13 of its potential returns per unit of risk. GenMont Biotech is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,960  in GenMont Biotech on December 23, 2024 and sell it today you would earn a total of  340.00  from holding GenMont Biotech or generate 17.35% return on investment over 90 days.

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

Transcend Information  vs.  GenMont Biotech

Transcend Information

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transcend Information are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Transcend Information showed solid returns over the last few months and may actually be approaching a breakup point.

GenMont Biotech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GenMont Biotech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, GenMont Biotech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transcend Information and GenMont Biotech

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

The idea behind Transcend Information and GenMont Biotech 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.