Correlation Between Idex ASA and Photocure

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

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

Diversification Opportunities for Idex ASA and Photocure

0.29

Correlation Coefficient

Idex ASA  Photocure

Modest diversification

The 3 months correlation between Idex and Photocure is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Idex ASA and Photocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photocure and Idex ASA 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 Idex ASA are associated (or correlated) with Photocure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photocure has no effect on the direction of Idex ASA i.e., Idex ASA and Photocure go up and down completely randomly.

Pair Corralation between Idex ASA and Photocure

Assuming the 90 days trading horizon Idex ASA is expected to under-perform the Photocure. In addition to that, Idex ASA is 1.77 times more volatile than Photocure. It trades about -0.1 of its total potential returns per unit of risk. Photocure is currently generating about -0.03 per unit of volatility. If you would invest  10,810  in Photocure on September 6, 2024 and sell it today you would lose (5,770) from holding Photocure or give up 53.38% of portfolio value over 90 days.

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

Idex ASA  vs.  Photocure

Idex ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Idex ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Photocure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Photocure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Photocure is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Idex ASA and Photocure

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

The idea behind Idex ASA and Photocure 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.