Correlation Between Benitec Biopharma and PreveCeutical Medical

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

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

Diversification Opportunities for Benitec Biopharma and PreveCeutical Medical

-0.48

Correlation Coefficient

Benitec Biopharma  PreveCeutical Medical

Very good diversification

The 3 months correlation between Benitec and PreveCeutical is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Benitec Biopharma Ltd and PreveCeutical Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PreveCeutical Medical and Benitec Biopharma 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 Benitec Biopharma Ltd are associated (or correlated) with PreveCeutical Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PreveCeutical Medical has no effect on the direction of Benitec Biopharma i.e., Benitec Biopharma and PreveCeutical Medical go up and down completely randomly.

Pair Corralation between Benitec Biopharma and PreveCeutical Medical

Given the investment horizon of 90 days Benitec Biopharma is expected to generate 1.12 times less return on investment than PreveCeutical Medical. But when comparing it to its historical volatility, Benitec Biopharma Ltd is 3.04 times less risky than PreveCeutical Medical. It trades about 0.16 of its potential returns per unit of risk. PreveCeutical Medical is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.79  in PreveCeutical Medical on December 22, 2024 and sell it today you would lose (0.10) from holding PreveCeutical Medical or give up 5.59% of portfolio value over 90 days.

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

Benitec Biopharma Ltd  vs.  PreveCeutical Medical

Benitec Biopharma

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Benitec Biopharma Ltd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Benitec Biopharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

PreveCeutical Medical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PreveCeutical Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, PreveCeutical Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Benitec Biopharma and PreveCeutical Medical

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

The idea behind Benitec Biopharma Ltd and PreveCeutical Medical 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.