Correlation Between TC BioPharm and Opthea

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

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

Diversification Opportunities for TC BioPharm and Opthea

0.48

Correlation Coefficient

TC BioPharm  Opthea

Very weak diversification

The 3 months correlation between TCBPW and Opthea is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding TC BioPharm plc and Opthea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opthea and TC BioPharm 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 TC BioPharm plc are associated (or correlated) with Opthea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opthea has no effect on the direction of TC BioPharm i.e., TC BioPharm and Opthea go up and down completely randomly.

Pair Corralation between TC BioPharm and Opthea

Assuming the 90 days horizon TC BioPharm plc is expected to generate 5.73 times more return on investment than Opthea. However, TC BioPharm is 5.73 times more volatile than Opthea. It trades about 0.09 of its potential returns per unit of risk. Opthea is currently generating about 0.1 per unit of risk. If you would invest  2.90  in TC BioPharm plc on September 3, 2024 and sell it today you would lose (1.03) from holding TC BioPharm plc or give up 35.52% of portfolio value over 90 days.

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

TC BioPharm plc  vs.  Opthea

TC BioPharm plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TC BioPharm plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TC BioPharm showed solid returns over the last few months and may actually be approaching a breakup point.

Opthea

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with TC BioPharm and Opthea

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

The idea behind TC BioPharm plc and Opthea 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.