Correlation Between Alterola Biotech and Addex Therapeutics

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

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

Diversification Opportunities for Alterola Biotech and Addex Therapeutics

0.55

Correlation Coefficient

Alterola Biotech  Addex Therapeutics

Very weak diversification

The 3 months correlation between Alterola and Addex is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alterola Biotech and Addex Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addex Therapeutics and Alterola Biotech 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 Alterola Biotech are associated (or correlated) with Addex Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addex Therapeutics has no effect on the direction of Alterola Biotech i.e., Alterola Biotech and Addex Therapeutics go up and down completely randomly.

Pair Corralation between Alterola Biotech and Addex Therapeutics

Given the investment horizon of 90 days Alterola Biotech is expected to generate 2.53 times more return on investment than Addex Therapeutics. However, Alterola Biotech is 2.53 times more volatile than Addex Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Addex Therapeutics is currently generating about 0.05 per unit of risk. If you would invest  1.43  in Alterola Biotech on January 25, 2024 and sell it today you would lose (1.06) from holding Alterola Biotech or give up 74.13% of portfolio value over 90 days.

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

Alterola Biotech  vs.  Addex Therapeutics

Alterola Biotech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alterola Biotech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Alterola Biotech demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Addex Therapeutics

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Addex Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Addex Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alterola Biotech and Addex Therapeutics

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

The idea behind Alterola Biotech and Addex 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.