Can any of the company-specific risk be diversified away by investing in both Vivani Medical and Vericel Corp 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 Vivani Medical and Vericel Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vivani Medical and Vericel Corp Ord, you can compare the effects of market volatilities on Vivani Medical and Vericel Corp 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 Vivani Medical with a short position of Vericel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vivani Medical and Vericel Corp.
Diversification Opportunities for Vivani Medical and Vericel Corp
The 3 months correlation between Vivani and Vericel is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Vivani Medical and Vericel Corp Ord in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vericel Corp Ord and Vivani Medical 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 Vivani Medical are associated (or correlated) with Vericel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vericel Corp Ord has no effect on the direction of Vivani Medical i.e., Vivani Medical and Vericel Corp go up and down completely randomly.
Pair Corralation between Vivani Medical and Vericel Corp
Given the investment horizon of 90 days Vivani Medical is expected to under-perform the Vericel Corp. But the stock apears to be less risky and, when comparing its historical volatility, Vivani Medical is 1.02 times less risky than Vericel Corp. The stock trades about -0.03 of its potential returns per unit of risk. The Vericel Corp Ord is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,319 in Vericel Corp Ord on September 2, 2023 and sell it today you would earn a total of 235.00 from holding Vericel Corp Ord or generate 7.08% return on investment over 90 days.
Over the last 90 days Vivani Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vivani Medical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
Compared to the overall equity markets, risk-adjusted returns on investments in Vericel Corp Ord are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent technical and fundamental indicators, Vericel Corp may actually be approaching a critical reversion point that can send shares even higher in January 2024.
Vivani Medical and Vericel Corp Volatility Contrast
Predicted Return Density
Pair Trading with Vivani Medical and Vericel Corp
The main advantage of trading using opposite Vivani Medical and Vericel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vivani Medical position performs unexpectedly, Vericel Corp 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 Vericel Corp will offset losses from the drop in Vericel Corp's long position.
The idea behind Vivani Medical and Vericel Corp Ord 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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