Correlation Between Arctic Bioscience and Photocure

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

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

Diversification Opportunities for Arctic Bioscience and Photocure

-0.17

Correlation Coefficient

Arctic Bioscience  Photocure

Good diversification

The 3 months correlation between Arctic and Photocure is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Bioscience AS and Photocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photocure and Arctic Bioscience 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 Arctic Bioscience AS are associated (or correlated) with Photocure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photocure has no effect on the direction of Arctic Bioscience i.e., Arctic Bioscience and Photocure go up and down completely randomly.

Pair Corralation between Arctic Bioscience and Photocure

Assuming the 90 days trading horizon Arctic Bioscience AS is expected to under-perform the Photocure. In addition to that, Arctic Bioscience is 3.37 times more volatile than Photocure. It trades about -0.03 of its total potential returns per unit of risk. Photocure is currently generating about -0.01 per unit of volatility. If you would invest  6,600  in Photocure on October 7, 2024 and sell it today you would lose (750.00) from holding Photocure or give up 11.36% of portfolio value over 90 days.

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

Arctic Bioscience AS  vs.  Photocure

Arctic Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Bioscience AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Photocure

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Photocure are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Photocure disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arctic Bioscience and Photocure

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

The idea behind Arctic Bioscience AS and Photocure 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.