Correlation Between CHAR Technologies and Theratechnologies

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

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

Diversification Opportunities for CHAR Technologies and Theratechnologies

-0.44

Correlation Coefficient

CHAR Technologies  Theratechnologies

Very good diversification

The 3 months correlation between CHAR and Theratechnologies is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CHAR Technologies and Theratechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theratechnologies and CHAR Technologies 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 CHAR Technologies are associated (or correlated) with Theratechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theratechnologies has no effect on the direction of CHAR Technologies i.e., CHAR Technologies and Theratechnologies go up and down completely randomly.

Pair Corralation between CHAR Technologies and Theratechnologies

Assuming the 90 days horizon CHAR Technologies is expected to under-perform the Theratechnologies. But the stock apears to be less risky and, when comparing its historical volatility, CHAR Technologies is 1.33 times less risky than Theratechnologies. The stock trades about -0.02 of its potential returns per unit of risk. The Theratechnologies is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  480.00  in Theratechnologies on October 5, 2024 and sell it today you would lose (215.00) from holding Theratechnologies or give up 44.79% of portfolio value over 90 days.

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

CHAR Technologies  vs.  Theratechnologies

CHAR Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHAR Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Theratechnologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Theratechnologies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Theratechnologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHAR Technologies and Theratechnologies

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

The idea behind CHAR Technologies and Theratechnologies 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.