Correlation Between Velan and Caldwell Partners

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

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

Diversification Opportunities for Velan and Caldwell Partners

-0.2

Correlation Coefficient

Velan  Caldwell Partners

Good diversification

The 3 months correlation between Velan and Caldwell is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Velan Inc and Caldwell Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners and Velan 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 Velan Inc are associated (or correlated) with Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of Velan i.e., Velan and Caldwell Partners go up and down completely randomly.

Pair Corralation between Velan and Caldwell Partners

Assuming the 90 days trading horizon Velan Inc is expected to generate 1.12 times more return on investment than Caldwell Partners. However, Velan is 1.12 times more volatile than Caldwell Partners International. It trades about 0.25 of its potential returns per unit of risk. Caldwell Partners International is currently generating about -0.01 per unit of risk. If you would invest  630.00  in Velan Inc on September 3, 2024 and sell it today you would earn a total of  470.00  from holding Velan Inc or generate 74.6% return on investment over 90 days.

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

Velan Inc  vs.  Caldwell Partners Internationa

Velan Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Velan Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Velan displayed solid returns over the last few months and may actually be approaching a breakup point.

Caldwell Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caldwell Partners International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Caldwell Partners is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Velan and Caldwell Partners

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

The idea behind Velan Inc and Caldwell Partners International 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.