Correlation Between Pegavision and Icares Medicus

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

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

Diversification Opportunities for Pegavision and Icares Medicus

0.83

Correlation Coefficient

Pegavision  Icares Medicus

Very poor diversification

The 3 months correlation between Pegavision and Icares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pegavision and Icares Medicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icares Medicus 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 Icares Medicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icares Medicus has no effect on the direction of Pegavision i.e., Pegavision and Icares Medicus go up and down completely randomly.

Pair Corralation between Pegavision and Icares Medicus

Assuming the 90 days trading horizon Pegavision is expected to under-perform the Icares Medicus. But the stock apears to be less risky and, when comparing its historical volatility, Pegavision is 1.1 times less risky than Icares Medicus. The stock trades about -0.18 of its potential returns per unit of risk. The Icares Medicus is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  12,500  in Icares Medicus on September 24, 2024 and sell it today you would lose (850.00) from holding Icares Medicus or give up 6.8% of portfolio value over 90 days.

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

Pegavision  vs.  Icares Medicus

Pegavision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pegavision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Icares Medicus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icares Medicus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Pegavision and Icares Medicus

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

The idea behind Pegavision and Icares Medicus 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.