Correlation Between Moberg Pharma and Infant Bacterial

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

By analyzing existing cross correlation between Moberg Pharma AB and Infant Bacterial Therapeutics, you can compare the effects of market volatilities on Moberg Pharma and Infant Bacterial 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 Moberg Pharma with a short position of Infant Bacterial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moberg Pharma and Infant Bacterial.

Diversification Opportunities for Moberg Pharma and Infant Bacterial

0.06

Correlation Coefficient

Moberg Pharma  Infant Bacterial

Significant diversification

The 3 months correlation between Moberg and Infant is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Moberg Pharma AB and Infant Bacterial Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infant Bacterial and Moberg Pharma 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 Moberg Pharma AB are associated (or correlated) with Infant Bacterial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infant Bacterial has no effect on the direction of Moberg Pharma i.e., Moberg Pharma and Infant Bacterial go up and down completely randomly.

Pair Corralation between Moberg Pharma and Infant Bacterial

Assuming the 90 days trading horizon Moberg Pharma is expected to generate 3.86 times less return on investment than Infant Bacterial. In addition to that, Moberg Pharma is 1.14 times more volatile than Infant Bacterial Therapeutics. It trades about 0.04 of its total potential returns per unit of risk. Infant Bacterial Therapeutics is currently generating about 0.17 per unit of volatility. If you would invest  3,820  in Infant Bacterial Therapeutics on September 23, 2024 and sell it today you would earn a total of  2,080  from holding Infant Bacterial Therapeutics or generate 54.45% return on investment over 90 days.

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

Moberg Pharma AB  vs.  Infant Bacterial Therapeutics

Moberg Pharma AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Moberg Pharma AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Moberg Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Infant Bacterial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Infant Bacterial Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Infant Bacterial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moberg Pharma and Infant Bacterial

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

The idea behind Moberg Pharma AB and Infant Bacterial Therapeutics 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.