Correlation Between Compugen and Clal Biotechnology

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

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

Diversification Opportunities for Compugen and Clal Biotechnology

0.63

Correlation Coefficient

Compugen  Clal Biotechnology

Poor diversification

The 3 months correlation between Compugen and Clal is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Compugen and Clal Biotechnology Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clal Biotechnology and Compugen 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 Compugen are associated (or correlated) with Clal Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clal Biotechnology has no effect on the direction of Compugen i.e., Compugen and Clal Biotechnology go up and down completely randomly.

Pair Corralation between Compugen and Clal Biotechnology

Assuming the 90 days trading horizon Compugen is expected to under-perform the Clal Biotechnology. In addition to that, Compugen is 1.18 times more volatile than Clal Biotechnology Industries. It trades about -0.14 of its total potential returns per unit of risk. Clal Biotechnology Industries is currently generating about -0.06 per unit of volatility. If you would invest  3,860  in Clal Biotechnology Industries on September 12, 2024 and sell it today you would lose (360.00) from holding Clal Biotechnology Industries or give up 9.33% of portfolio value over 90 days.

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

Compugen  vs.  Clal Biotechnology Industries

Compugen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compugen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Clal Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clal Biotechnology Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Compugen and Clal Biotechnology

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

The idea behind Compugen and Clal Biotechnology Industries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.