Correlation Between Therapeutic Solutions and Biotron

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

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

Diversification Opportunities for Therapeutic Solutions and Biotron

0.34

Correlation Coefficient

Therapeutic Solutions  Biotron

Weak diversification

The 3 months correlation between Therapeutic and Biotron is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Therapeutic Solutions Internat and Biotron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotron Limited and Therapeutic Solutions 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 Therapeutic Solutions International are associated (or correlated) with Biotron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotron Limited has no effect on the direction of Therapeutic Solutions i.e., Therapeutic Solutions and Biotron go up and down completely randomly.

Pair Corralation between Therapeutic Solutions and Biotron

Given the investment horizon of 90 days Therapeutic Solutions is expected to generate 1.11 times less return on investment than Biotron. But when comparing it to its historical volatility, Therapeutic Solutions International is 1.52 times less risky than Biotron. It trades about 0.12 of its potential returns per unit of risk. Biotron Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.98  in Biotron Limited on December 28, 2024 and sell it today you would lose (0.71) from holding Biotron Limited or give up 72.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Therapeutic Solutions Internat  vs.  Biotron Limited

Therapeutic Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Therapeutic Solutions International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Therapeutic Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Biotron Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Biotron Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Biotron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Therapeutic Solutions and Biotron

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

The idea behind Therapeutic Solutions International and Biotron Limited 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.