Correlation Between GFPT Public and DOD Biotech

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

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

Diversification Opportunities for GFPT Public and DOD Biotech

0.79

Correlation Coefficient

GFPT Public  DOD Biotech

Poor diversification

The 3 months correlation between GFPT and DOD is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding GFPT Public and DOD Biotech Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOD Biotech Public and GFPT Public 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 GFPT Public are associated (or correlated) with DOD Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOD Biotech Public has no effect on the direction of GFPT Public i.e., GFPT Public and DOD Biotech go up and down completely randomly.

Pair Corralation between GFPT Public and DOD Biotech

Assuming the 90 days trading horizon GFPT Public is expected to generate 0.67 times more return on investment than DOD Biotech. However, GFPT Public is 1.48 times less risky than DOD Biotech. It trades about -0.14 of its potential returns per unit of risk. DOD Biotech Public is currently generating about -0.38 per unit of risk. If you would invest  1,190  in GFPT Public on September 15, 2024 and sell it today you would lose (140.00) from holding GFPT Public or give up 11.76% of portfolio value over 90 days.

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

GFPT Public  vs.  DOD Biotech Public

GFPT Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GFPT Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

DOD Biotech Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOD Biotech Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with GFPT Public and DOD Biotech

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

The idea behind GFPT Public and DOD Biotech Public 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.