Correlation Between Modular Medical and INVO Bioscience

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

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

Diversification Opportunities for Modular Medical and INVO Bioscience

-0.38

Correlation Coefficient

Modular Medical  INVO Bioscience

Very good diversification

The 3 months correlation between Modular and INVO is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Modular Medical and INVO Bioscience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVO Bioscience and Modular Medical 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 Modular Medical are associated (or correlated) with INVO Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVO Bioscience has no effect on the direction of Modular Medical i.e., Modular Medical and INVO Bioscience go up and down completely randomly.

Pair Corralation between Modular Medical and INVO Bioscience

Given the investment horizon of 90 days Modular Medical is expected to under-perform the INVO Bioscience. But the stock apears to be less risky and, when comparing its historical volatility, Modular Medical is 5.69 times less risky than INVO Bioscience. The stock trades about -0.26 of its potential returns per unit of risk. The INVO Bioscience is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  69.00  in INVO Bioscience on September 23, 2024 and sell it today you would earn a total of  15.00  from holding INVO Bioscience or generate 21.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.46%
Values	Daily Returns

Modular Medical  vs.  INVO Bioscience

Modular Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modular Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

INVO Bioscience

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days INVO Bioscience has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, INVO Bioscience displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modular Medical and INVO Bioscience

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

The idea behind Modular Medical and INVO Bioscience 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.