Correlation Between Khiron Life and New Leaf

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

By analyzing existing cross correlation between Khiron Life Sciences and New Leaf Ventures, you can compare the effects of market volatilities on Khiron Life and New Leaf 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 Khiron Life with a short position of New Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Khiron Life and New Leaf.

Diversification Opportunities for Khiron Life and New Leaf

-0.12

Correlation Coefficient

Khiron Life  New Leaf

Good diversification

The 3 months correlation between Khiron and New is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Khiron Life Sciences and New Leaf Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Leaf Ventures and Khiron Life 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 Khiron Life Sciences are associated (or correlated) with New Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Leaf Ventures has no effect on the direction of Khiron Life i.e., Khiron Life and New Leaf go up and down completely randomly.

Pair Corralation between Khiron Life and New Leaf

If you would invest  0.80  in New Leaf Ventures on September 13, 2024 and sell it today you would lose (0.44) from holding New Leaf Ventures or give up 55.0% of portfolio value over 90 days.

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

Khiron Life Sciences  vs.  New Leaf Ventures

Khiron Life Sciences

Risk-Adjusted Performance

12 of 100

Good

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

New Leaf Ventures

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Leaf Ventures are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Leaf reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Khiron Life and New Leaf

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

The idea behind Khiron Life Sciences and New Leaf Ventures 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.