Correlation Between Birchtech Corp and NeuPath Health

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

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

Diversification Opportunities for Birchtech Corp and NeuPath Health

0.07

Correlation Coefficient

Birchtech Corp  NeuPath Health

Significant diversification

The 3 months correlation between Birchtech and NeuPath is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Birchtech Corp and NeuPath Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeuPath Health and Birchtech Corp 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 Birchtech Corp are associated (or correlated) with NeuPath Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeuPath Health has no effect on the direction of Birchtech Corp i.e., Birchtech Corp and NeuPath Health go up and down completely randomly.

Pair Corralation between Birchtech Corp and NeuPath Health

Assuming the 90 days trading horizon Birchtech Corp is expected to under-perform the NeuPath Health. In addition to that, Birchtech Corp is 1.05 times more volatile than NeuPath Health. It trades about -0.17 of its total potential returns per unit of risk. NeuPath Health is currently generating about 0.03 per unit of volatility. If you would invest  19.00  in NeuPath Health on September 22, 2024 and sell it today you would earn a total of  1.00  from holding NeuPath Health or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	25.4%
Values	Daily Returns

Birchtech Corp  vs.  NeuPath Health

Birchtech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birchtech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

NeuPath Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NeuPath Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NeuPath Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Birchtech Corp and NeuPath Health

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

The idea behind Birchtech Corp and NeuPath Health 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.