Correlation Between Defence Therapeutics and Biotron

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

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

Diversification Opportunities for Defence Therapeutics and Biotron

-0.01

Correlation Coefficient

Defence Therapeutics  Biotron

Good diversification

The 3 months correlation between Defence and Biotron is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Defence Therapeutics and Biotron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotron Limited and Defence Therapeutics 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 Defence Therapeutics are associated (or correlated) with Biotron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotron Limited has no effect on the direction of Defence Therapeutics i.e., Defence Therapeutics and Biotron go up and down completely randomly.

Pair Corralation between Defence Therapeutics and Biotron

Assuming the 90 days horizon Defence Therapeutics is expected to generate 0.18 times more return on investment than Biotron. However, Defence Therapeutics is 5.53 times less risky than Biotron. It trades about 0.21 of its potential returns per unit of risk. Biotron Limited is currently generating about -0.18 per unit of risk. If you would invest  40.00  in Defence Therapeutics on September 14, 2024 and sell it today you would earn a total of  1.00  from holding Defence Therapeutics or generate 2.5% return on investment over 90 days.

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

Defence Therapeutics  vs.  Biotron Limited

Defence Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defence Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Defence Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Biotron Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biotron Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Biotron may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Defence Therapeutics and Biotron

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

The idea behind Defence Therapeutics and Biotron Limited 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.