Correlation Between Opthea and Avid Bioservices

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

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

Diversification Opportunities for Opthea and Avid Bioservices

0.22

Correlation Coefficient

Opthea  Avid Bioservices

Modest diversification

The 3 months correlation between Opthea and Avid is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Opthea and Avid Bioservices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avid Bioservices and Opthea 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 Opthea are associated (or correlated) with Avid Bioservices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avid Bioservices has no effect on the direction of Opthea i.e., Opthea and Avid Bioservices go up and down completely randomly.

Pair Corralation between Opthea and Avid Bioservices

Considering the 90-day investment horizon Opthea is expected to generate 15.84 times more return on investment than Avid Bioservices. However, Opthea is 15.84 times more volatile than Avid Bioservices. It trades about 0.2 of its potential returns per unit of risk. Avid Bioservices is currently generating about 0.17 per unit of risk. If you would invest  326.00  in Opthea on November 19, 2024 and sell it today you would earn a total of  195.00  from holding Opthea or generate 59.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.25%
Values	Daily Returns

Opthea  vs.  Avid Bioservices

Opthea

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Opthea are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Opthea unveiled solid returns over the last few months and may actually be approaching a breakup point.

Avid Bioservices

Risk-Adjusted Performance

Good

Over the last 90 days Avid Bioservices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Avid Bioservices is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Opthea and Avid Bioservices

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

The idea behind Opthea and Avid Bioservices 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.