Correlation Between Defence Therapeutics and Telix Pharmaceuticals

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

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

Diversification Opportunities for Defence Therapeutics and Telix Pharmaceuticals

-0.27

Correlation Coefficient

Defence Therapeutics  Telix Pharmaceuticals

Very good diversification

The 3 months correlation between Defence and Telix is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Defence Therapeutics and Telix Pharmaceuticals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telix Pharmaceuticals 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 Telix Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telix Pharmaceuticals has no effect on the direction of Defence Therapeutics i.e., Defence Therapeutics and Telix Pharmaceuticals go up and down completely randomly.

Pair Corralation between Defence Therapeutics and Telix Pharmaceuticals

Assuming the 90 days horizon Defence Therapeutics is expected to generate 7.17 times less return on investment than Telix Pharmaceuticals. But when comparing it to its historical volatility, Defence Therapeutics is 1.23 times less risky than Telix Pharmaceuticals. It trades about 0.03 of its potential returns per unit of risk. Telix Pharmaceuticals Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,189  in Telix Pharmaceuticals Limited on September 16, 2024 and sell it today you would earn a total of  411.00  from holding Telix Pharmaceuticals Limited or generate 34.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Defence Therapeutics  vs.  Telix Pharmaceuticals 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.

Telix Pharmaceuticals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telix Pharmaceuticals Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Telix Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Defence Therapeutics and Telix Pharmaceuticals

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

The idea behind Defence Therapeutics and Telix Pharmaceuticals 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.