Correlation Between Viemed Healthcare and Cyclo Therapeutics

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

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

Diversification Opportunities for Viemed Healthcare and Cyclo Therapeutics

-0.17

Correlation Coefficient

Viemed Healthcare  Cyclo Therapeutics

Good diversification

The 3 months correlation between Viemed and Cyclo is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Viemed Healthcare and Cyclo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclo Therapeutics and Viemed Healthcare 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 Viemed Healthcare are associated (or correlated) with Cyclo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclo Therapeutics has no effect on the direction of Viemed Healthcare i.e., Viemed Healthcare and Cyclo Therapeutics go up and down completely randomly.

Pair Corralation between Viemed Healthcare and Cyclo Therapeutics

Considering the 90-day investment horizon Viemed Healthcare is expected to under-perform the Cyclo Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Viemed Healthcare is 5.29 times less risky than Cyclo Therapeutics. The stock trades about -0.06 of its potential returns per unit of risk. The Cyclo Therapeutics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Cyclo Therapeutics on December 19, 2024 and sell it today you would earn a total of  3.00  from holding Cyclo Therapeutics or generate 4.84% return on investment over 90 days.

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

Viemed Healthcare  vs.  Cyclo Therapeutics

Viemed Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Viemed Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Viemed Healthcare is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Cyclo Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cyclo Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Cyclo Therapeutics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Viemed Healthcare and Cyclo Therapeutics

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

The idea behind Viemed Healthcare and Cyclo Therapeutics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.