Correlation Between American Scientf and Lifeline Biotechnologies

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

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

Diversification Opportunities for American Scientf and Lifeline Biotechnologies

-0.27

Correlation Coefficient

American Scientf  Lifeline Biotechnologies

Very good diversification

The 3 months correlation between American and Lifeline is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding American Scientf and Lifeline Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeline Biotechnologies and American Scientf 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 American Scientf are associated (or correlated) with Lifeline Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeline Biotechnologies has no effect on the direction of American Scientf i.e., American Scientf and Lifeline Biotechnologies go up and down completely randomly.

Pair Corralation between American Scientf and Lifeline Biotechnologies

Given the investment horizon of 90 days American Scientf is expected to generate 7.18 times less return on investment than Lifeline Biotechnologies. But when comparing it to its historical volatility, American Scientf is 2.22 times less risky than Lifeline Biotechnologies. It trades about 0.04 of its potential returns per unit of risk. Lifeline Biotechnologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Lifeline Biotechnologies on September 23, 2024 and sell it today you would lose (0.02) from holding Lifeline Biotechnologies or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.46%
Values	Daily Returns

American Scientf  vs.  Lifeline Biotechnologies

American Scientf

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Scientf are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, American Scientf showed solid returns over the last few months and may actually be approaching a breakup point.

Lifeline Biotechnologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeline Biotechnologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Lifeline Biotechnologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Scientf and Lifeline Biotechnologies

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

The idea behind American Scientf and Lifeline Biotechnologies 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.