Correlation Between Therasense and GB Sciences

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

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

Diversification Opportunities for Therasense and GB Sciences

0.0

Correlation Coefficient

Therasense  GB Sciences

Pay attention - limited upside

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

Pair Corralation between Therasense and GB Sciences

If you would invest  0.03  in GB Sciences on September 16, 2024 and sell it today you would earn a total of  0.51  from holding GB Sciences or generate 1700.0% return on investment over 90 days.

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

Therasense  vs.  GB Sciences

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 current stock price agitation, may contribute to short-term losses for the retail investors.

GB Sciences

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Therasense and GB Sciences

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

The idea behind Therasense and GB Sciences 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.