Correlation Between Pegavision and Maxigen Biotech

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

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

Diversification Opportunities for Pegavision and Maxigen Biotech

0.26

Correlation Coefficient

Pegavision  Maxigen Biotech

Modest diversification

The 3 months correlation between Pegavision and Maxigen is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Pegavision and Maxigen Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxigen Biotech and Pegavision 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 Pegavision are associated (or correlated) with Maxigen Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxigen Biotech has no effect on the direction of Pegavision i.e., Pegavision and Maxigen Biotech go up and down completely randomly.

Pair Corralation between Pegavision and Maxigen Biotech

Assuming the 90 days trading horizon Pegavision is expected to generate 0.6 times more return on investment than Maxigen Biotech. However, Pegavision is 1.65 times less risky than Maxigen Biotech. It trades about 0.04 of its potential returns per unit of risk. Maxigen Biotech is currently generating about -0.02 per unit of risk. If you would invest  36,200  in Pegavision on December 25, 2024 and sell it today you would earn a total of  1,050  from holding Pegavision or generate 2.9% return on investment over 90 days.

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

Pegavision  vs.  Maxigen Biotech

Pegavision

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pegavision are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Pegavision is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Maxigen Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maxigen Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Maxigen Biotech is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Pegavision and Maxigen Biotech

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

The idea behind Pegavision and Maxigen 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.