Correlation Between Neogen and Calliditas Therapeutics

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

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

Diversification Opportunities for Neogen and Calliditas Therapeutics

0.64

Correlation Coefficient

Neogen  Calliditas Therapeutics

Poor diversification

The 3 months correlation between Neogen and Calliditas is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Neogen and Calliditas Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calliditas Therapeutics and Neogen 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 Neogen are associated (or correlated) with Calliditas Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calliditas Therapeutics has no effect on the direction of Neogen i.e., Neogen and Calliditas Therapeutics go up and down completely randomly.

Pair Corralation between Neogen and Calliditas Therapeutics

Given the investment horizon of 90 days Neogen is expected to under-perform the Calliditas Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Neogen is 1.37 times less risky than Calliditas Therapeutics. The stock trades about -0.23 of its potential returns per unit of risk. The Calliditas Therapeutics is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,125  in Calliditas Therapeutics on February 2, 2024 and sell it today you would lose (131.00) from holding Calliditas Therapeutics or give up 6.16% of portfolio value over 90 days.

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

Neogen  vs.  Calliditas Therapeutics

Neogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Calliditas Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Neogen and Calliditas Therapeutics

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

The idea behind Neogen and Calliditas 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.