Can any of the company-specific risk be diversified away by investing in both 23Andme Holding 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 23Andme Holding and Addex Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 23Andme Holding Co and Addex Therapeutics, you can compare the effects of market volatilities on 23Andme Holding 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 23Andme Holding with a short position of Addex Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of 23Andme Holding and Addex Therapeutics.
Diversification Opportunities for 23Andme Holding and Addex Therapeutics
The 3 months correlation between 23Andme and Addex is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding 23Andme Holding Co and Addex Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addex Therapeutics and 23Andme Holding 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 23Andme Holding Co 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 23Andme Holding i.e., 23Andme Holding and Addex Therapeutics go up and down completely randomly.
Pair Corralation between 23Andme Holding and Addex Therapeutics
Allowing for the 90-day total investment horizon 23Andme Holding Co is expected to generate 0.94 times more return on investment than Addex Therapeutics. However, 23Andme Holding Co is 1.07 times less risky than Addex Therapeutics. It trades about -0.1 of its potential returns per unit of risk. Addex Therapeutics is currently generating about -0.1 per unit of risk. If you would invest 198.00 in 23Andme Holding Co on August 30, 2023 and sell it today you would lose (110.71) from holding 23Andme Holding Co or give up 55.91% of portfolio value over 90 days.
Over the last 90 days 23Andme Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
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.
23Andme Holding and Addex Therapeutics Volatility Contrast
Predicted Return Density
Pair Trading with 23Andme Holding and Addex Therapeutics
The main advantage of trading using opposite 23Andme Holding and Addex Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 23Andme Holding 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 23Andme Holding Co 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.
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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