Correlation Between Innoviva and Resideo Technologies

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

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

Diversification Opportunities for Innoviva and Resideo Technologies

0.5

Correlation Coefficient

Innoviva  Resideo Technologies

Very weak diversification

The 3 months correlation between Innoviva and Resideo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Innoviva and Resideo Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resideo Technologies 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 Resideo Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resideo Technologies has no effect on the direction of Innoviva i.e., Innoviva and Resideo Technologies go up and down completely randomly.

Pair Corralation between Innoviva and Resideo Technologies

Given the investment horizon of 90 days Innoviva is expected to generate 0.4 times more return on investment than Resideo Technologies. However, Innoviva is 2.5 times less risky than Resideo Technologies. It trades about -0.06 of its potential returns per unit of risk. Resideo Technologies is currently generating about -0.2 per unit of risk. If you would invest  1,779  in Innoviva on December 21, 2024 and sell it today you would lose (58.00) from holding Innoviva or give up 3.26% of portfolio value over 90 days.

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

Innoviva  vs.  Resideo Technologies

Innoviva

Risk-Adjusted Performance

Very Weak

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

Resideo Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Resideo Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Innoviva and Resideo Technologies

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

The idea behind Innoviva and Resideo Technologies 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .