Correlation Between INC Research and CV Sciences

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

By analyzing existing cross correlation between INC Research Holdings and CV Sciences, you can compare the effects of market volatilities on INC Research and CV Sciences 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 INC Research with a short position of CV Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of INC Research and CV Sciences.

Diversification Opportunities for INC Research and CV Sciences

0.57

Correlation Coefficient

INC Research  CV Sciences

Very weak diversification

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

Pair Corralation between INC Research and CV Sciences

Given the investment horizon of 90 days INC Research Holdings is expected to under-perform the CV Sciences. But the stock apears to be less risky and, when comparing its historical volatility, INC Research Holdings is 2.12 times less risky than CV Sciences. The stock trades about -0.14 of its potential returns per unit of risk. The CV Sciences is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5.00  in CV Sciences on September 1, 2024 and sell it today you would lose (1.00) from holding CV Sciences or give up 20.0% of portfolio value over 90 days.

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

INC Research Holdings  vs.  CV Sciences

INC Research Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

CV Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CV Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CV Sciences is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with INC Research and CV Sciences

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

The idea behind INC Research Holdings and CV Sciences 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.