Correlation Between INTEL CDR and Velan

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

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

Diversification Opportunities for INTEL CDR and Velan

0.42

Correlation Coefficient

INTEL CDR  Velan

Very weak diversification

The 3 months correlation between INTEL and Velan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding INTEL CDR and Velan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Velan Inc and INTEL CDR 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 INTEL CDR are associated (or correlated) with Velan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Velan Inc has no effect on the direction of INTEL CDR i.e., INTEL CDR and Velan go up and down completely randomly.

Pair Corralation between INTEL CDR and Velan

Assuming the 90 days trading horizon INTEL CDR is expected to generate 2.78 times less return on investment than Velan. But when comparing it to its historical volatility, INTEL CDR is 1.28 times less risky than Velan. It trades about 0.07 of its potential returns per unit of risk. Velan Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,058  in Velan Inc on December 29, 2024 and sell it today you would earn a total of  572.00  from holding Velan Inc or generate 54.06% return on investment over 90 days.

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

INTEL CDR  vs.  Velan Inc

INTEL CDR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTEL CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, INTEL CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Velan Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Velan Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Velan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTEL CDR and Velan

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

The idea behind INTEL CDR and Velan Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.