Correlation Between Photocure and Circa Group

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

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

Diversification Opportunities for Photocure and Circa Group

0.04

Correlation Coefficient

Photocure  Circa Group

Significant diversification

The 3 months correlation between Photocure and Circa is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Photocure and Circa Group AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Circa Group AS and Photocure 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 Photocure are associated (or correlated) with Circa Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Circa Group AS has no effect on the direction of Photocure i.e., Photocure and Circa Group go up and down completely randomly.

Pair Corralation between Photocure and Circa Group

Assuming the 90 days trading horizon Photocure is expected to under-perform the Circa Group. But the stock apears to be less risky and, when comparing its historical volatility, Photocure is 2.31 times less risky than Circa Group. The stock trades about -0.01 of its potential returns per unit of risk. The Circa Group AS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Circa Group AS on September 5, 2024 and sell it today you would earn a total of  14.00  from holding Circa Group AS or generate 28.0% return on investment over 90 days.

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

Photocure  vs.  Circa Group AS

Photocure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Photocure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Photocure is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Circa Group AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Circa Group AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Circa Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Photocure and Circa Group

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

The idea behind Photocure and Circa Group AS 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.