Correlation Between Lineage Cell and Evogene

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

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

Diversification Opportunities for Lineage Cell and Evogene

0.57

Correlation Coefficient

Lineage Cell  Evogene

Very weak diversification

The 3 months correlation between Lineage and Evogene is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lineage Cell Therapeutics and Evogene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evogene and Lineage Cell 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 Lineage Cell Therapeutics are associated (or correlated) with Evogene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evogene has no effect on the direction of Lineage Cell i.e., Lineage Cell and Evogene go up and down completely randomly.

Pair Corralation between Lineage Cell and Evogene

Assuming the 90 days trading horizon Lineage Cell Therapeutics is expected to generate 1.17 times more return on investment than Evogene. However, Lineage Cell is 1.17 times more volatile than Evogene. It trades about -0.14 of its potential returns per unit of risk. Evogene is currently generating about -0.29 per unit of risk. If you would invest  34,370  in Lineage Cell Therapeutics on September 14, 2024 and sell it today you would lose (12,550) from holding Lineage Cell Therapeutics or give up 36.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.87%
Values	Daily Returns

Lineage Cell Therapeutics  vs.  Evogene

Lineage Cell Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lineage Cell Therapeutics 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Evogene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evogene 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lineage Cell and Evogene

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

The idea behind Lineage Cell Therapeutics and Evogene 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.