Correlation Between Genie Music and InnoTherapy

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

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

Diversification Opportunities for Genie Music and InnoTherapy

0.25

Correlation Coefficient

Genie Music  InnoTherapy

Modest diversification

The 3 months correlation between Genie and InnoTherapy is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Genie Music and InnoTherapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoTherapy and Genie Music 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 Genie Music are associated (or correlated) with InnoTherapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoTherapy has no effect on the direction of Genie Music i.e., Genie Music and InnoTherapy go up and down completely randomly.

Pair Corralation between Genie Music and InnoTherapy

Assuming the 90 days trading horizon Genie Music is expected to under-perform the InnoTherapy. In addition to that, Genie Music is 1.05 times more volatile than InnoTherapy. It trades about -0.24 of its total potential returns per unit of risk. InnoTherapy is currently generating about 0.05 per unit of volatility. If you would invest  821,000  in InnoTherapy on September 1, 2024 and sell it today you would earn a total of  16,000  from holding InnoTherapy or generate 1.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Genie Music  vs.  InnoTherapy

Genie Music

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genie Music has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Genie Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

InnoTherapy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InnoTherapy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Genie Music and InnoTherapy

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

The idea behind Genie Music and InnoTherapy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.