Correlation Between ECM Libra and Duopharma Biotech

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

By analyzing existing cross correlation between ECM Libra Financial and Duopharma Biotech Bhd, you can compare the effects of market volatilities on ECM Libra and Duopharma Biotech 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 ECM Libra with a short position of Duopharma Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECM Libra and Duopharma Biotech.

Diversification Opportunities for ECM Libra and Duopharma Biotech

0.51

Correlation Coefficient

ECM Libra  Duopharma Biotech

Very weak diversification

The 3 months correlation between ECM and Duopharma is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ECM Libra Financial and Duopharma Biotech Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duopharma Biotech Bhd and ECM Libra 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 ECM Libra Financial are associated (or correlated) with Duopharma Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duopharma Biotech Bhd has no effect on the direction of ECM Libra i.e., ECM Libra and Duopharma Biotech go up and down completely randomly.

Pair Corralation between ECM Libra and Duopharma Biotech

Assuming the 90 days trading horizon ECM Libra Financial is expected to generate 3.76 times more return on investment than Duopharma Biotech. However, ECM Libra is 3.76 times more volatile than Duopharma Biotech Bhd. It trades about 0.03 of its potential returns per unit of risk. Duopharma Biotech Bhd is currently generating about 0.05 per unit of risk. If you would invest  18.00  in ECM Libra Financial on September 14, 2024 and sell it today you would earn a total of  0.00  from holding ECM Libra Financial or generate 0.0% return on investment over 90 days.

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

ECM Libra Financial  vs.  Duopharma Biotech Bhd

ECM Libra Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ECM Libra Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, ECM Libra may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Duopharma Biotech Bhd

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Duopharma Biotech Bhd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Duopharma Biotech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ECM Libra and Duopharma Biotech

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

The idea behind ECM Libra Financial and Duopharma Biotech Bhd 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.