Correlation Between ChemoMetec and Aquaporin

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

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

Diversification Opportunities for ChemoMetec and Aquaporin

-0.53

Correlation Coefficient

ChemoMetec  Aquaporin

Excellent diversification

The 3 months correlation between ChemoMetec and Aquaporin is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding ChemoMetec AS and Aquaporin AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquaporin AS and ChemoMetec 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 ChemoMetec AS are associated (or correlated) with Aquaporin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquaporin AS has no effect on the direction of ChemoMetec i.e., ChemoMetec and Aquaporin go up and down completely randomly.

Pair Corralation between ChemoMetec and Aquaporin

Assuming the 90 days trading horizon ChemoMetec AS is expected to generate 0.85 times more return on investment than Aquaporin. However, ChemoMetec AS is 1.18 times less risky than Aquaporin. It trades about 0.14 of its potential returns per unit of risk. Aquaporin AS is currently generating about -0.02 per unit of risk. If you would invest  36,373  in ChemoMetec AS on October 9, 2024 and sell it today you would earn a total of  14,227  from holding ChemoMetec AS or generate 39.11% return on investment over 90 days.

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

ChemoMetec AS  vs.  Aquaporin AS

ChemoMetec AS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ChemoMetec exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aquaporin AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquaporin AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ChemoMetec and Aquaporin

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

The idea behind ChemoMetec AS and Aquaporin AS 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .