Correlation Between HCW Biologics and Opthea

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

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

Diversification Opportunities for HCW Biologics and Opthea

0.2

Correlation Coefficient

HCW Biologics  Opthea

Modest diversification

The 3 months correlation between HCW and Opthea is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics and Opthea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opthea 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 Opthea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opthea has no effect on the direction of HCW Biologics i.e., HCW Biologics and Opthea go up and down completely randomly.

Pair Corralation between HCW Biologics and Opthea

Given the investment horizon of 90 days HCW Biologics is expected to generate 2.64 times more return on investment than Opthea. However, HCW Biologics is 2.64 times more volatile than Opthea. It trades about 0.02 of its potential returns per unit of risk. Opthea is currently generating about 0.0 per unit of risk. If you would invest  43.00  in HCW Biologics on December 28, 2024 and sell it today you would lose (13.00) from holding HCW Biologics or give up 30.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.52%
Values	Daily Returns

HCW Biologics  vs.  Opthea

HCW Biologics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HCW Biologics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, HCW Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Opthea

Risk-Adjusted Performance

Very Weak

Over the last 90 days Opthea has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Opthea is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HCW Biologics and Opthea

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

The idea behind HCW Biologics and Opthea 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.