Correlation Between Scisparc and Therasense

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

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

Diversification Opportunities for Scisparc and Therasense

0.0

Correlation Coefficient

Scisparc  Therasense

Pay attention - limited upside

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

Pair Corralation between Scisparc and Therasense

Given the investment horizon of 90 days Scisparc is expected to under-perform the Therasense. In addition to that, Scisparc is 1.08 times more volatile than Therasense. It trades about -0.01 of its total potential returns per unit of risk. Therasense is currently generating about 0.01 per unit of volatility. If you would invest  0.35  in Therasense on October 7, 2024 and sell it today you would lose (0.34) from holding Therasense or give up 97.14% of portfolio value over 90 days.

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

Scisparc  vs.  Therasense

Scisparc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scisparc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Scisparc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Therasense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Therasense has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Therasense is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Scisparc and Therasense

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

The idea behind Scisparc and Therasense 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.