Can any of the company-specific risk be diversified away by investing in both Addex Therapeutics and Vivani 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 Addex Therapeutics and Vivani Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addex Therapeutics and Vivani Medical, you can compare the effects of market volatilities on Addex Therapeutics and Vivani 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 Addex Therapeutics with a short position of Vivani Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addex Therapeutics and Vivani Medical.
Diversification Opportunities for Addex Therapeutics and Vivani Medical
The 3 months correlation between Addex and Vivani is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Addex Therapeutics and Vivani Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vivani Medical and Addex Therapeutics 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 Addex Therapeutics are associated (or correlated) with Vivani Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vivani Medical has no effect on the direction of Addex Therapeutics i.e., Addex Therapeutics and Vivani Medical go up and down completely randomly.
Pair Corralation between Addex Therapeutics and Vivani Medical
Given the investment horizon of 90 days Addex Therapeutics is expected to under-perform the Vivani Medical. In addition to that, Addex Therapeutics is 1.62 times more volatile than Vivani Medical. It trades about -0.04 of its total potential returns per unit of risk. Vivani Medical is currently generating about -0.05 per unit of volatility. If you would invest 588.00 in Vivani Medical on August 31, 2023 and sell it today you would lose (493.00) from holding Vivani Medical or give up 83.84% of portfolio value over 90 days.
Over the last 90 days Addex Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2023. The recent disarray may also be a sign of long period up-swing for the firm insiders.
Compared to the overall equity markets, risk-adjusted returns on investments in Vivani Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Vivani Medical may actually be approaching a critical reversion point that can send shares even higher in December 2023.
Addex Therapeutics and Vivani Medical Volatility Contrast
Predicted Return Density
Pair Trading with Addex Therapeutics and Vivani Medical
The main advantage of trading using opposite Addex Therapeutics and Vivani Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addex Therapeutics position performs unexpectedly, Vivani 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 Vivani Medical will offset losses from the drop in Vivani Medical's long position.
The idea behind Addex Therapeutics and Vivani Medical 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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