Correlation Between MediciNova and Covalon Technologies

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

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

Diversification Opportunities for MediciNova and Covalon Technologies

0.19

Correlation Coefficient

MediciNova  Covalon Technologies

Average diversification

The 3 months correlation between MediciNova and Covalon is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding MediciNova and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies and MediciNova 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 MediciNova are associated (or correlated) with Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of MediciNova i.e., MediciNova and Covalon Technologies go up and down completely randomly.

Pair Corralation between MediciNova and Covalon Technologies

Given the investment horizon of 90 days MediciNova is expected to generate 2.84 times more return on investment than Covalon Technologies. However, MediciNova is 2.84 times more volatile than Covalon Technologies. It trades about 0.08 of its potential returns per unit of risk. Covalon Technologies is currently generating about 0.09 per unit of risk. If you would invest  165.00  in MediciNova on September 3, 2024 and sell it today you would earn a total of  42.00  from holding MediciNova or generate 25.45% return on investment over 90 days.

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

MediciNova  vs.  Covalon Technologies

MediciNova

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MediciNova showed solid returns over the last few months and may actually be approaching a breakup point.

Covalon Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Covalon Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Covalon Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MediciNova and Covalon Technologies

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

The idea behind MediciNova and Covalon Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.