Correlation Between Vg Life and Innovent Biologics

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

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

Diversification Opportunities for Vg Life and Innovent Biologics

-0.14

Correlation Coefficient

Vg Life  Innovent Biologics

Good diversification

The 3 months correlation between VGLS and Innovent is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Vg Life Sciences and Innovent Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovent Biologics and Vg Life 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 Vg Life Sciences are associated (or correlated) with Innovent Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovent Biologics has no effect on the direction of Vg Life i.e., Vg Life and Innovent Biologics go up and down completely randomly.

Pair Corralation between Vg Life and Innovent Biologics

Given the investment horizon of 90 days Vg Life Sciences is expected to generate 56.97 times more return on investment than Innovent Biologics. However, Vg Life is 56.97 times more volatile than Innovent Biologics. It trades about 0.2 of its potential returns per unit of risk. Innovent Biologics is currently generating about 0.06 per unit of risk. If you would invest  0.00  in Vg Life Sciences on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Vg Life Sciences or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Vg Life Sciences  vs.  Innovent Biologics

Vg Life Sciences

Risk-Adjusted Performance

Good

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

Innovent Biologics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Innovent Biologics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Innovent Biologics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vg Life and Innovent Biologics

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

The idea behind Vg Life Sciences and Innovent Biologics 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.