Correlation Between HCW Biologics and Entera Bio

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

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

Diversification Opportunities for HCW Biologics and Entera Bio

-0.17

Correlation Coefficient

HCW Biologics  Entera Bio

Good diversification

The 3 months correlation between HCW and Entera is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics and Entera Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entera Bio and HCW Biologics 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 HCW Biologics are associated (or correlated) with Entera Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entera Bio has no effect on the direction of HCW Biologics i.e., HCW Biologics and Entera Bio go up and down completely randomly.

Pair Corralation between HCW Biologics and Entera Bio

Given the investment horizon of 90 days HCW Biologics is expected to generate 9.69 times more return on investment than Entera Bio. However, HCW Biologics is 9.69 times more volatile than Entera Bio. It trades about 0.08 of its potential returns per unit of risk. Entera Bio is currently generating about 0.03 per unit of risk. If you would invest  46.00  in HCW Biologics on August 30, 2024 and sell it today you would earn a total of  4.00  from holding HCW Biologics or generate 8.7% return on investment over 90 days.

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

HCW Biologics  vs.  Entera Bio

HCW Biologics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HCW Biologics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HCW Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Entera Bio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Entera Bio are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Entera Bio may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with HCW Biologics and Entera Bio

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

The idea behind HCW Biologics and Entera Bio 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.