Correlation Between Disc Medicine and Avantor

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

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

Diversification Opportunities for Disc Medicine and Avantor

-0.54

Correlation Coefficient

Disc Medicine  Avantor

Excellent diversification

The 3 months correlation between Disc and Avantor is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Disc Medicine and Avantor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantor and Disc Medicine 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 Disc Medicine are associated (or correlated) with Avantor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantor has no effect on the direction of Disc Medicine i.e., Disc Medicine and Avantor go up and down completely randomly.

Pair Corralation between Disc Medicine and Avantor

Given the investment horizon of 90 days Disc Medicine is expected to generate 1.65 times more return on investment than Avantor. However, Disc Medicine is 1.65 times more volatile than Avantor. It trades about -0.02 of its potential returns per unit of risk. Avantor is currently generating about -0.05 per unit of risk. If you would invest  6,466  in Disc Medicine on October 8, 2024 and sell it today you would lose (84.00) from holding Disc Medicine or give up 1.3% of portfolio value over 90 days.

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

Disc Medicine  vs.  Avantor

Disc Medicine

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Disc Medicine are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Disc Medicine displayed solid returns over the last few months and may actually be approaching a breakup point.

Avantor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Disc Medicine and Avantor

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

The idea behind Disc Medicine and Avantor 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.