Correlation Between VTv Therapeutics and China Pharma

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

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

Diversification Opportunities for VTv Therapeutics and China Pharma

-0.47

Correlation Coefficient

VTv Therapeutics  China Pharma

Very good diversification

The 3 months correlation between VTv and China is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding vTv Therapeutics and China Pharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Pharma Holdings and VTv Therapeutics 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 vTv Therapeutics are associated (or correlated) with China Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Pharma Holdings has no effect on the direction of VTv Therapeutics i.e., VTv Therapeutics and China Pharma go up and down completely randomly.

Pair Corralation between VTv Therapeutics and China Pharma

Given the investment horizon of 90 days vTv Therapeutics is expected to generate 1.29 times more return on investment than China Pharma. However, VTv Therapeutics is 1.29 times more volatile than China Pharma Holdings. It trades about 0.01 of its potential returns per unit of risk. China Pharma Holdings is currently generating about -0.05 per unit of risk. If you would invest  3,124  in vTv Therapeutics on October 3, 2024 and sell it today you would lose (1,727) from holding vTv Therapeutics or give up 55.28% of portfolio value over 90 days.

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

vTv Therapeutics  vs.  China Pharma Holdings

vTv Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in vTv Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VTv Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

China Pharma Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Pharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, China Pharma is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with VTv Therapeutics and China Pharma

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

The idea behind vTv Therapeutics and China Pharma Holdings 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.