Correlation Between Golden Biotechnology and CVC Technologies

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

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

Diversification Opportunities for Golden Biotechnology and CVC Technologies

0.3

Correlation Coefficient

Golden Biotechnology  CVC Technologies

Weak diversification

The 3 months correlation between Golden and CVC is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Golden Biotechnology and CVC Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Technologies and Golden Biotechnology 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 Golden Biotechnology are associated (or correlated) with CVC Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Technologies has no effect on the direction of Golden Biotechnology i.e., Golden Biotechnology and CVC Technologies go up and down completely randomly.

Pair Corralation between Golden Biotechnology and CVC Technologies

Assuming the 90 days trading horizon Golden Biotechnology is expected to generate 1.38 times more return on investment than CVC Technologies. However, Golden Biotechnology is 1.38 times more volatile than CVC Technologies. It trades about 0.21 of its potential returns per unit of risk. CVC Technologies is currently generating about 0.21 per unit of risk. If you would invest  1,560  in Golden Biotechnology on October 11, 2024 and sell it today you would earn a total of  305.00  from holding Golden Biotechnology or generate 19.55% return on investment over 90 days.

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

Golden Biotechnology  vs.  CVC Technologies

Golden Biotechnology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Biotechnology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Golden Biotechnology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CVC Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVC Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CVC Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Golden Biotechnology and CVC Technologies

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

The idea behind Golden Biotechnology and CVC Technologies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.