Correlation Between Institute and Opthea

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

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

Diversification Opportunities for Institute and Opthea

0.24

Correlation Coefficient

Institute  Opthea

Modest diversification

The 3 months correlation between Institute and Opthea is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Institute of Biomedical and Opthea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opthea and Institute 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 Institute of Biomedical are associated (or correlated) with Opthea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opthea has no effect on the direction of Institute i.e., Institute and Opthea go up and down completely randomly.

Pair Corralation between Institute and Opthea

Given the investment horizon of 90 days Institute is expected to generate 1.13 times less return on investment than Opthea. In addition to that, Institute is 1.55 times more volatile than Opthea. It trades about 0.01 of its total potential returns per unit of risk. Opthea is currently generating about 0.02 per unit of volatility. If you would invest  360.00  in Opthea on December 26, 2024 and sell it today you would lose (19.00) from holding Opthea or give up 5.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

Institute of Biomedical  vs.  Opthea

Institute of Biomedical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Institute of Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak technical and fundamental indicators, Institute may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Opthea

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Opthea are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Opthea may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Institute and Opthea

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

The idea behind Institute of Biomedical and Opthea 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.