Correlation Between ChemoMetec and ViroGates

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

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

Diversification Opportunities for ChemoMetec and ViroGates

0.7

Correlation Coefficient

ChemoMetec  ViroGates

Poor diversification

The 3 months correlation between ChemoMetec and ViroGates is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ChemoMetec AS and ViroGates AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ViroGates 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 ViroGates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ViroGates AS has no effect on the direction of ChemoMetec i.e., ChemoMetec and ViroGates go up and down completely randomly.

Pair Corralation between ChemoMetec and ViroGates

Assuming the 90 days trading horizon ChemoMetec is expected to generate 4.25 times less return on investment than ViroGates. But when comparing it to its historical volatility, ChemoMetec AS is 2.44 times less risky than ViroGates. It trades about 0.1 of its potential returns per unit of risk. ViroGates AS is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  565.00  in ViroGates AS on September 2, 2024 and sell it today you would earn a total of  805.00  from holding ViroGates AS or generate 142.48% return on investment over 90 days.

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

ChemoMetec AS  vs.  ViroGates AS

ChemoMetec AS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 7 (%) 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.

ViroGates AS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ViroGates AS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, ViroGates displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChemoMetec and ViroGates

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

The idea behind ChemoMetec AS and ViroGates 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..