Correlation Between Transgene and Netgem SA

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

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

Diversification Opportunities for Transgene and Netgem SA

-0.49

Correlation Coefficient

Transgene  Netgem SA

Very good diversification

The 3 months correlation between Transgene and Netgem is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Transgene SA and Netgem SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netgem SA and Transgene 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 Transgene SA are associated (or correlated) with Netgem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netgem SA has no effect on the direction of Transgene i.e., Transgene and Netgem SA go up and down completely randomly.

Pair Corralation between Transgene and Netgem SA

Assuming the 90 days trading horizon Transgene SA is expected to under-perform the Netgem SA. But the stock apears to be less risky and, when comparing its historical volatility, Transgene SA is 1.12 times less risky than Netgem SA. The stock trades about -0.17 of its potential returns per unit of risk. The Netgem SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  81.00  in Netgem SA on September 12, 2024 and sell it today you would earn a total of  14.00  from holding Netgem SA or generate 17.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Transgene SA  vs.  Netgem SA

Transgene SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transgene SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Netgem SA

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Transgene and Netgem SA

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

The idea behind Transgene SA and Netgem SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.