Correlation Between Defence Therapeutics and Kane Biotech

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

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

Diversification Opportunities for Defence Therapeutics and Kane Biotech

-0.32

Correlation Coefficient

Defence Therapeutics  Kane Biotech

Very good diversification

The 3 months correlation between Defence and Kane is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Defence Therapeutics and Kane Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kane Biotech and Defence Therapeutics 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 Defence Therapeutics are associated (or correlated) with Kane Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kane Biotech has no effect on the direction of Defence Therapeutics i.e., Defence Therapeutics and Kane Biotech go up and down completely randomly.

Pair Corralation between Defence Therapeutics and Kane Biotech

Assuming the 90 days horizon Defence Therapeutics is expected to generate 2.82 times more return on investment than Kane Biotech. However, Defence Therapeutics is 2.82 times more volatile than Kane Biotech. It trades about 0.21 of its potential returns per unit of risk. Kane Biotech is currently generating about -0.01 per unit of risk. If you would invest  39.00  in Defence Therapeutics on December 28, 2024 and sell it today you would earn a total of  61.00  from holding Defence Therapeutics or generate 156.41% return on investment over 90 days.

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

Defence Therapeutics  vs.  Kane Biotech

Defence Therapeutics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Defence Therapeutics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Defence Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Kane Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kane Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Kane Biotech is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Defence Therapeutics and Kane Biotech

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

The idea behind Defence Therapeutics and Kane 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.