Correlation Between InnoTherapy and Sajo Seafood

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

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

Diversification Opportunities for InnoTherapy and Sajo Seafood

-0.14

Correlation Coefficient

InnoTherapy  Sajo Seafood

Good diversification

The 3 months correlation between InnoTherapy and Sajo is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding InnoTherapy and Sajo Seafood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sajo Seafood 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 Sajo Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sajo Seafood has no effect on the direction of InnoTherapy i.e., InnoTherapy and Sajo Seafood go up and down completely randomly.

Pair Corralation between InnoTherapy and Sajo Seafood

Assuming the 90 days trading horizon InnoTherapy is expected to generate 1.72 times more return on investment than Sajo Seafood. However, InnoTherapy is 1.72 times more volatile than Sajo Seafood. It trades about 0.36 of its potential returns per unit of risk. Sajo Seafood is currently generating about -0.32 per unit of risk. If you would invest  828,000  in InnoTherapy on October 25, 2024 and sell it today you would earn a total of  128,000  from holding InnoTherapy or generate 15.46% return on investment over 90 days.

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

InnoTherapy  vs.  Sajo Seafood

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.

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.

Pair Trading with InnoTherapy and Sajo Seafood

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

The idea behind InnoTherapy and Sajo Seafood 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.