Correlation Between Orphazyme and ChemoMetec

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

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

Diversification Opportunities for Orphazyme and ChemoMetec

0.56

Correlation Coefficient

Orphazyme  ChemoMetec

Very weak diversification

The 3 months correlation between Orphazyme and ChemoMetec is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Orphazyme AS and ChemoMetec AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChemoMetec AS and Orphazyme 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 Orphazyme AS are associated (or correlated) with ChemoMetec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChemoMetec AS has no effect on the direction of Orphazyme i.e., Orphazyme and ChemoMetec go up and down completely randomly.

Pair Corralation between Orphazyme and ChemoMetec

Assuming the 90 days trading horizon Orphazyme AS is expected to generate 0.66 times more return on investment than ChemoMetec. However, Orphazyme AS is 1.52 times less risky than ChemoMetec. It trades about -0.13 of its potential returns per unit of risk. ChemoMetec AS is currently generating about -0.35 per unit of risk. If you would invest  118,980  in Orphazyme AS on January 26, 2024 and sell it today you would lose (11,500) from holding Orphazyme AS or give up 9.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Orphazyme AS  vs.  ChemoMetec AS

Orphazyme AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orphazyme AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Orphazyme is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ChemoMetec AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChemoMetec AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Orphazyme and ChemoMetec

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

The idea behind Orphazyme AS and ChemoMetec AS 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.