Correlation Between Inventiva and Biocardia

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

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

Diversification Opportunities for Inventiva and Biocardia

0.4

Correlation Coefficient

Inventiva  Biocardia

Very weak diversification

The 3 months correlation between Inventiva and Biocardia is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Inventiva Sa and Biocardia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biocardia 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 Biocardia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biocardia has no effect on the direction of Inventiva i.e., Inventiva and Biocardia go up and down completely randomly.

Pair Corralation between Inventiva and Biocardia

Considering the 90-day investment horizon Inventiva is expected to generate 1.13 times less return on investment than Biocardia. But when comparing it to its historical volatility, Inventiva Sa is 1.22 times less risky than Biocardia. It trades about 0.12 of its potential returns per unit of risk. Biocardia is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Biocardia on December 30, 2024 and sell it today you would earn a total of  65.00  from holding Biocardia or generate 30.23% return on investment over 90 days.

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

Inventiva Sa  vs.  Biocardia

Inventiva Sa

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inventiva Sa are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Inventiva sustained solid returns over the last few months and may actually be approaching a breakup point.

Biocardia

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biocardia are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Biocardia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inventiva and Biocardia

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

The idea behind Inventiva Sa and Biocardia 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.