Correlation Between Galapagos and Orthofix Medical
Can any of the company-specific risk be diversified away by investing in both Galapagos and Orthofix Medical 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 Galapagos and Orthofix Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Galapagos NV ADR and Orthofix Medical, you can compare the effects of market volatilities on Galapagos and Orthofix Medical 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 Galapagos with a short position of Orthofix Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galapagos and Orthofix Medical.
Diversification Opportunities for Galapagos and Orthofix Medical
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Galapagos and Orthofix is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Galapagos NV ADR and Orthofix Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orthofix Medical and Galapagos 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 Galapagos NV ADR are associated (or correlated) with Orthofix Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orthofix Medical has no effect on the direction of Galapagos i.e., Galapagos and Orthofix Medical go up and down completely randomly.
Pair Corralation between Galapagos and Orthofix Medical
Given the investment horizon of 90 days Galapagos NV ADR is expected to under-perform the Orthofix Medical. But the stock apears to be less risky and, when comparing its historical volatility, Galapagos NV ADR is 1.71 times less risky than Orthofix Medical. The stock trades about -0.28 of its potential returns per unit of risk. The Orthofix Medical is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,444 in Orthofix Medical on January 26, 2024 and sell it today you would lose (88.00) from holding Orthofix Medical or give up 6.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Galapagos NV ADR vs. Orthofix Medical
Performance |
| Timeline |
| Galapagos NV ADR |
| Orthofix Medical |
Galapagos and Orthofix Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Galapagos and Orthofix Medical
The main advantage of trading using opposite Galapagos and Orthofix Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galapagos position performs unexpectedly, Orthofix Medical 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 Orthofix Medical will offset losses from the drop in Orthofix Medical's long position.| Galapagos vs. CytomX Therapeutics | Galapagos vs. Spero Therapeutics | Galapagos vs. Instil Bio | Galapagos vs. NextCure |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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