Correlation Between Vita Coco and Albireo Pharma

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

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

Diversification Opportunities for Vita Coco and Albireo Pharma

0.63

Correlation Coefficient

Vita Coco  Albireo Pharma

Poor diversification

The 3 months correlation between Vita and Albireo is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Albireo Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albireo Pharma and Vita Coco 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 Vita Coco are associated (or correlated) with Albireo Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albireo Pharma has no effect on the direction of Vita Coco i.e., Vita Coco and Albireo Pharma go up and down completely randomly.

Pair Corralation between Vita Coco and Albireo Pharma

Given the investment horizon of 90 days Vita Coco is expected to generate 2.78 times less return on investment than Albireo Pharma. But when comparing it to its historical volatility, Vita Coco is 2.46 times less risky than Albireo Pharma. It trades about 0.08 of its potential returns per unit of risk. Albireo Pharma is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,936  in Albireo Pharma on March 17, 2024 and sell it today you would earn a total of  2,479  from holding Albireo Pharma or generate 128.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	34.88%
Values	Daily Returns

Vita Coco  vs.  Albireo Pharma

Vita Coco

Risk-Adjusted Performance

9 of 100

OK

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

Albireo Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albireo Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Albireo Pharma is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vita Coco and Albireo Pharma

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

The idea behind Vita Coco and Albireo Pharma 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..