Correlation Between Entheon Biomedical and Defence Therapeutics

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

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

Diversification Opportunities for Entheon Biomedical and Defence Therapeutics

-0.14

Correlation Coefficient

Entheon Biomedical  Defence Therapeutics

Good diversification

The 3 months correlation between Entheon and Defence is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Entheon Biomedical Corp and Defence Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defence Therapeutics and Entheon Biomedical 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 Entheon Biomedical Corp are associated (or correlated) with Defence Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defence Therapeutics has no effect on the direction of Entheon Biomedical i.e., Entheon Biomedical and Defence Therapeutics go up and down completely randomly.

Pair Corralation between Entheon Biomedical and Defence Therapeutics

Assuming the 90 days horizon Entheon Biomedical Corp is expected to generate 23.97 times more return on investment than Defence Therapeutics. However, Entheon Biomedical is 23.97 times more volatile than Defence Therapeutics. It trades about 0.25 of its potential returns per unit of risk. Defence Therapeutics is currently generating about 0.22 per unit of risk. If you would invest  7.30  in Entheon Biomedical Corp on September 17, 2024 and sell it today you would earn a total of  4.70  from holding Entheon Biomedical Corp or generate 64.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Entheon Biomedical Corp  vs.  Defence Therapeutics

Entheon Biomedical Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entheon Biomedical Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Entheon Biomedical reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Entheon Biomedical and Defence Therapeutics

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

The idea behind Entheon Biomedical Corp and Defence Therapeutics 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.