Correlation Between Isofol Medical and Alligator Bioscience

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

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

Diversification Opportunities for Isofol Medical and Alligator Bioscience

0.42

Correlation Coefficient

Isofol Medical  Alligator Bioscience

Very weak diversification

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

Pair Corralation between Isofol Medical and Alligator Bioscience

Assuming the 90 days trading horizon Isofol Medical AB is expected to generate 0.64 times more return on investment than Alligator Bioscience. However, Isofol Medical AB is 1.57 times less risky than Alligator Bioscience. It trades about 0.02 of its potential returns per unit of risk. Alligator Bioscience AB is currently generating about -0.22 per unit of risk. If you would invest  261.00  in Isofol Medical AB on October 7, 2024 and sell it today you would lose (12.00) from holding Isofol Medical AB or give up 4.6% of portfolio value over 90 days.

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

Isofol Medical AB  vs.  Alligator Bioscience AB

Isofol Medical AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Isofol Medical AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Isofol Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Alligator Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alligator Bioscience AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Isofol Medical and Alligator Bioscience

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

The idea behind Isofol Medical AB and Alligator Bioscience AB 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.