Correlation Between Therasense and Enzolytics

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

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

Diversification Opportunities for Therasense and Enzolytics

0.0

Correlation Coefficient

Therasense  Enzolytics

Pay attention - limited upside

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

Pair Corralation between Therasense and Enzolytics

Given the investment horizon of 90 days Therasense is expected to generate 1.27 times more return on investment than Enzolytics. However, Therasense is 1.27 times more volatile than Enzolytics. It trades about 0.01 of its potential returns per unit of risk. Enzolytics is currently generating about -0.04 per unit of risk. If you would invest  0.34  in Therasense on October 9, 2024 and sell it today you would lose (0.33) from holding Therasense or give up 97.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Therasense  vs.  Enzolytics

Therasense

Risk-Adjusted Performance

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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.

Enzolytics

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Enzolytics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Therasense and Enzolytics

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

The idea behind Therasense and Enzolytics 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.