Correlation Between ChitogenX and Covalon Technologies

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

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

Diversification Opportunities for ChitogenX and Covalon Technologies

-0.54

Correlation Coefficient

ChitogenX  Covalon Technologies

Excellent diversification

The 3 months correlation between ChitogenX and Covalon is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding ChitogenX and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies and ChitogenX 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 ChitogenX are associated (or correlated) with Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of ChitogenX i.e., ChitogenX and Covalon Technologies go up and down completely randomly.

Pair Corralation between ChitogenX and Covalon Technologies

Assuming the 90 days horizon ChitogenX is expected to under-perform the Covalon Technologies. In addition to that, ChitogenX is 2.72 times more volatile than Covalon Technologies. It trades about -0.19 of its total potential returns per unit of risk. Covalon Technologies is currently generating about 0.08 per unit of volatility. If you would invest  233.00  in Covalon Technologies on September 4, 2024 and sell it today you would earn a total of  32.00  from holding Covalon Technologies or generate 13.73% return on investment over 90 days.

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

ChitogenX  vs.  Covalon Technologies

ChitogenX

Risk-Adjusted Performance

0 of 100

Very Weak

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

Covalon Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Covalon Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Covalon Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChitogenX and Covalon Technologies

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

The idea behind ChitogenX and Covalon Technologies 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.