Correlation Between ChitogenX and Nascent Biotech

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

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

Diversification Opportunities for ChitogenX and Nascent Biotech

-0.71

Correlation Coefficient

ChitogenX  Nascent Biotech

Pay attention - limited upside

The 3 months correlation between ChitogenX and Nascent is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding ChitogenX and Nascent Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nascent Biotech 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 Nascent Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nascent Biotech has no effect on the direction of ChitogenX i.e., ChitogenX and Nascent Biotech go up and down completely randomly.

Pair Corralation between ChitogenX and Nascent Biotech

Assuming the 90 days horizon ChitogenX is expected to under-perform the Nascent Biotech. But the otc stock apears to be less risky and, when comparing its historical volatility, ChitogenX is 1.5 times less risky than Nascent Biotech. The otc stock trades about -0.19 of its potential returns per unit of risk. The Nascent Biotech is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.17  in Nascent Biotech on September 13, 2024 and sell it today you would earn a total of  1.28  from holding Nascent Biotech or generate 30.7% return on investment over 90 days.

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

ChitogenX  vs.  Nascent Biotech

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 weak 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.

Nascent Biotech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nascent Biotech are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Nascent Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChitogenX and Nascent Biotech

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

The idea behind ChitogenX and Nascent Biotech 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.