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

-0.27

Correlation Coefficient

HCW Biologics  Opthea

Very good diversification

The 3 months correlation between HCW and Opthea is -0.27. 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 under-perform the Opthea. In addition to that, HCW Biologics is 4.37 times more volatile than Opthea. It trades about -0.03 of its total potential returns per unit of risk. Opthea is currently generating about 0.2 per unit of volatility. If you would invest  326.00  in Opthea on November 19, 2024 and sell it today you would earn a total of  195.00  from holding Opthea or generate 59.82% 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.  Opthea

HCW Biologics

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCW Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Opthea

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Opthea are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Opthea unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.