Correlation Between Zoetis and GT Biopharma

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

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

Diversification Opportunities for Zoetis and GT Biopharma

-0.83

Correlation Coefficient

Zoetis  GT Biopharma

Pay attention - limited upside

The 3 months correlation between Zoetis and GTBP is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Zoetis Inc and GT Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Biopharma and Zoetis 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 Zoetis Inc are associated (or correlated) with GT Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Biopharma has no effect on the direction of Zoetis i.e., Zoetis and GT Biopharma go up and down completely randomly.

Pair Corralation between Zoetis and GT Biopharma

Considering the 90-day investment horizon Zoetis Inc is expected to under-perform the GT Biopharma. But the stock apears to be less risky and, when comparing its historical volatility, Zoetis Inc is 3.7 times less risky than GT Biopharma. The stock trades about -0.04 of its potential returns per unit of risk. The GT Biopharma is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  212.00  in GT Biopharma on August 31, 2024 and sell it today you would earn a total of  74.00  from holding GT Biopharma or generate 34.91% return on investment over 90 days.

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

Zoetis Inc  vs.  GT Biopharma

Zoetis Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoetis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Zoetis is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

GT Biopharma

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GT Biopharma are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, GT Biopharma reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zoetis and GT Biopharma

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

The idea behind Zoetis Inc and GT Biopharma 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.