Correlation Between LIFE Old and Scopus Biopharma

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

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

Diversification Opportunities for LIFE Old and Scopus Biopharma

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Correlation Coefficient

LIFE Old  Scopus Biopharma

Pay attention - limited upside

The 3 months correlation between LIFE and Scopus is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LIFE Old and Scopus Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scopus Biopharma and LIFE Old 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 LIFE Old are associated (or correlated) with Scopus Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scopus Biopharma has no effect on the direction of LIFE Old i.e., LIFE Old and Scopus Biopharma go up and down completely randomly.

Pair Corralation between LIFE Old and Scopus Biopharma

Given the investment horizon of 90 days LIFE Old is expected to under-perform the Scopus Biopharma. But the stock apears to be less risky and, when comparing its historical volatility, LIFE Old is 2.42 times less risky than Scopus Biopharma. The stock trades about -0.04 of its potential returns per unit of risk. The Scopus Biopharma is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Scopus Biopharma on October 11, 2024 and sell it today you would lose (2.00) from holding Scopus Biopharma or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.0%
Values	Daily Returns

LIFE Old  vs.  Scopus Biopharma

LIFE Old

Risk-Adjusted Performance

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Very Weak

Over the last 90 days LIFE Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, LIFE Old is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Scopus Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scopus Biopharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Scopus Biopharma is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LIFE Old and Scopus Biopharma

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

The idea behind LIFE Old and Scopus Biopharma 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 Global Correlations module to find global opportunities by holding instruments from different markets.