Correlation Between Roivant Sciences and Upbound

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

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

Diversification Opportunities for Roivant Sciences and Upbound

-0.14

Correlation Coefficient

Roivant Sciences  Upbound

Good diversification

The 3 months correlation between Roivant and Upbound is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Roivant Sciences and Upbound Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upbound Group and Roivant Sciences 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 Roivant Sciences are associated (or correlated) with Upbound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upbound Group has no effect on the direction of Roivant Sciences i.e., Roivant Sciences and Upbound go up and down completely randomly.

Pair Corralation between Roivant Sciences and Upbound

Given the investment horizon of 90 days Roivant Sciences is expected to generate 1.44 times more return on investment than Upbound. However, Roivant Sciences is 1.44 times more volatile than Upbound Group. It trades about 0.15 of its potential returns per unit of risk. Upbound Group is currently generating about -0.19 per unit of risk. If you would invest  1,008  in Roivant Sciences on January 26, 2024 and sell it today you would earn a total of  82.00  from holding Roivant Sciences or generate 8.13% return on investment over 90 days.

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

Roivant Sciences  vs.  Upbound Group

Roivant Sciences

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roivant Sciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Roivant Sciences may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Upbound Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Upbound Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Roivant Sciences and Upbound

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

The idea behind Roivant Sciences and Upbound Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.