Correlation Between Defence Therapeutics and Therasense

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

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

Diversification Opportunities for Defence Therapeutics and Therasense

0.0

Correlation Coefficient

Defence Therapeutics  Therasense

Pay attention - limited upside

The 3 months correlation between Defence and Therasense is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Defence Therapeutics and Therasense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Therasense 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 Therasense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Therasense has no effect on the direction of Defence Therapeutics i.e., Defence Therapeutics and Therasense go up and down completely randomly.

Pair Corralation between Defence Therapeutics and Therasense

If you would invest  41.00  in Defence Therapeutics on December 5, 2024 and sell it today you would earn a total of  38.00  from holding Defence Therapeutics or generate 92.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Defence Therapeutics  vs.  Therasense

Defence Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Defence Therapeutics are ranked lower than 10 (%) 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.

Therasense

Risk-Adjusted Performance

Very Weak

Over the last 90 days Therasense has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Therasense is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Defence Therapeutics and Therasense

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

The idea behind Defence Therapeutics and Therasense 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.