Correlation Between GrafTech International and Innoviva

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

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

Diversification Opportunities for GrafTech International and Innoviva

0.25

Correlation Coefficient

GrafTech International  Innoviva

Modest diversification

The 3 months correlation between GrafTech and Innoviva is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding GrafTech International and Innoviva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innoviva and GrafTech International 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 GrafTech International are associated (or correlated) with Innoviva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innoviva has no effect on the direction of GrafTech International i.e., GrafTech International and Innoviva go up and down completely randomly.

Pair Corralation between GrafTech International and Innoviva

Considering the 90-day investment horizon GrafTech International is expected to under-perform the Innoviva. In addition to that, GrafTech International is 6.63 times more volatile than Innoviva. It trades about -0.26 of its total potential returns per unit of risk. Innoviva is currently generating about -0.72 per unit of volatility. If you would invest  1,917  in Innoviva on October 10, 2024 and sell it today you would lose (189.00) from holding Innoviva or give up 9.86% of portfolio value over 90 days.

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

GrafTech International  vs.  Innoviva

GrafTech International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

Innoviva

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innoviva has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GrafTech International and Innoviva

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

The idea behind GrafTech International and Innoviva 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.