Correlation Between BAXALTA and Verde Clean

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

By analyzing existing cross correlation between BAXALTA INC 525 and Verde Clean Fuels, you can compare the effects of market volatilities on BAXALTA and Verde Clean 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 BAXALTA with a short position of Verde Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAXALTA and Verde Clean.

Diversification Opportunities for BAXALTA and Verde Clean

-0.04

Correlation Coefficient

BAXALTA  Verde Clean

Good diversification

The 3 months correlation between BAXALTA and Verde is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding BAXALTA INC 525 and Verde Clean Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Clean Fuels and BAXALTA 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 BAXALTA INC 525 are associated (or correlated) with Verde Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Clean Fuels has no effect on the direction of BAXALTA i.e., BAXALTA and Verde Clean go up and down completely randomly.

Pair Corralation between BAXALTA and Verde Clean

Assuming the 90 days trading horizon BAXALTA INC 525 is expected to generate 0.49 times more return on investment than Verde Clean. However, BAXALTA INC 525 is 2.05 times less risky than Verde Clean. It trades about -0.03 of its potential returns per unit of risk. Verde Clean Fuels is currently generating about -0.06 per unit of risk. If you would invest  9,221  in BAXALTA INC 525 on December 23, 2024 and sell it today you would lose (84.00) from holding BAXALTA INC 525 or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	27.87%
Values	Daily Returns

BAXALTA INC 525  vs.  Verde Clean Fuels

BAXALTA INC 525

Risk-Adjusted Performance

Very Weak

Over the last 90 days BAXALTA INC 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BAXALTA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Verde Clean Fuels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verde Clean Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BAXALTA and Verde Clean

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

The idea behind BAXALTA INC 525 and Verde Clean Fuels 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.