Correlation Between Royal Helium and Theratechnologies

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

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

Diversification Opportunities for Royal Helium and Theratechnologies

-0.49

Correlation Coefficient

Royal Helium  Theratechnologies

Very good diversification

The 3 months correlation between Royal and Theratechnologies is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Royal Helium and Theratechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theratechnologies and Royal Helium 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 Royal Helium are associated (or correlated) with Theratechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theratechnologies has no effect on the direction of Royal Helium i.e., Royal Helium and Theratechnologies go up and down completely randomly.

Pair Corralation between Royal Helium and Theratechnologies

Assuming the 90 days horizon Royal Helium is expected to generate 64.74 times more return on investment than Theratechnologies. However, Royal Helium is 64.74 times more volatile than Theratechnologies. It trades about 0.27 of its potential returns per unit of risk. Theratechnologies is currently generating about -0.04 per unit of risk. If you would invest  3.00  in Royal Helium on December 26, 2024 and sell it today you would earn a total of  3,343  from holding Royal Helium or generate 111433.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Royal Helium  vs.  Theratechnologies

Royal Helium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Helium are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Royal Helium showed solid returns over the last few months and may actually be approaching a breakup point.

Theratechnologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Theratechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Royal Helium and Theratechnologies

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

The idea behind Royal Helium and Theratechnologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.