Correlation Between Innoviva and GrafTech International

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

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

Diversification Opportunities for Innoviva and GrafTech International

0.25

Correlation Coefficient

Innoviva  GrafTech International

Modest diversification

The 3 months correlation between Innoviva and GrafTech is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Innoviva and GrafTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrafTech International and Innoviva 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 Innoviva are associated (or correlated) with GrafTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrafTech International has no effect on the direction of Innoviva i.e., Innoviva and GrafTech International go up and down completely randomly.

Pair Corralation between Innoviva and GrafTech International

Given the investment horizon of 90 days Innoviva is expected to generate 0.27 times more return on investment than GrafTech International. However, Innoviva is 3.71 times less risky than GrafTech International. It trades about 0.05 of its potential returns per unit of risk. GrafTech International is currently generating about -0.02 per unit of risk. If you would invest  1,304  in Innoviva on October 10, 2024 and sell it today you would earn a total of  424.00  from holding Innoviva or generate 32.52% return on investment over 90 days.

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

Innoviva  vs.  GrafTech International

Innoviva

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innoviva has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

GrafTech International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innoviva and GrafTech International

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

The idea behind Innoviva and GrafTech International 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.