Correlation Between Inventiva and Gensight Biologics

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

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

Diversification Opportunities for Inventiva and Gensight Biologics

-0.6

Correlation Coefficient

Inventiva  Gensight Biologics

Excellent diversification

The 3 months correlation between Inventiva and Gensight is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Inventiva SA and Gensight Biologics SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gensight Biologics and Inventiva 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 Inventiva SA are associated (or correlated) with Gensight Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gensight Biologics has no effect on the direction of Inventiva i.e., Inventiva and Gensight Biologics go up and down completely randomly.

Pair Corralation between Inventiva and Gensight Biologics

Assuming the 90 days trading horizon Inventiva SA is expected to generate 1.66 times more return on investment than Gensight Biologics. However, Inventiva is 1.66 times more volatile than Gensight Biologics SA. It trades about 0.05 of its potential returns per unit of risk. Gensight Biologics SA is currently generating about 0.01 per unit of risk. If you would invest  211.00  in Inventiva SA on September 3, 2024 and sell it today you would earn a total of  26.00  from holding Inventiva SA or generate 12.32% return on investment over 90 days.

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

Inventiva SA  vs.  Gensight Biologics SA

Inventiva SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inventiva SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inventiva sustained solid returns over the last few months and may actually be approaching a breakup point.

Gensight Biologics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gensight Biologics SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Gensight Biologics is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Inventiva and Gensight Biologics

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

The idea behind Inventiva SA and Gensight Biologics SA 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.