Correlation Between Defence Therapeutics and Oxford Nanopore

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

By analyzing existing cross correlation between Defence Therapeutics and Oxford Nanopore Technologies, you can compare the effects of market volatilities on Defence Therapeutics and Oxford Nanopore 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 Oxford Nanopore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defence Therapeutics and Oxford Nanopore.

Diversification Opportunities for Defence Therapeutics and Oxford Nanopore

0.11

Correlation Coefficient

Defence Therapeutics  Oxford Nanopore

Average diversification

The 3 months correlation between Defence and Oxford is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Defence Therapeutics and Oxford Nanopore Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Nanopore Tech 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 Oxford Nanopore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Nanopore Tech has no effect on the direction of Defence Therapeutics i.e., Defence Therapeutics and Oxford Nanopore go up and down completely randomly.

Pair Corralation between Defence Therapeutics and Oxford Nanopore

Assuming the 90 days horizon Defence Therapeutics is expected to generate 3.57 times less return on investment than Oxford Nanopore. But when comparing it to its historical volatility, Defence Therapeutics is 2.14 times less risky than Oxford Nanopore. It trades about 0.03 of its potential returns per unit of risk. Oxford Nanopore Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  192.00  in Oxford Nanopore Technologies on September 13, 2024 and sell it today you would earn a total of  13.00  from holding Oxford Nanopore Technologies or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Defence Therapeutics  vs.  Oxford Nanopore Technologies

Defence Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defence Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Defence Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Oxford Nanopore Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oxford Nanopore Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Oxford Nanopore reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Defence Therapeutics and Oxford Nanopore

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

The idea behind Defence Therapeutics and Oxford Nanopore 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.