Correlation Between Ventana Biotech and Active Health

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

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

Diversification Opportunities for Ventana Biotech and Active Health

0.5

Correlation Coefficient

Ventana Biotech  Active Health

Very weak diversification

The 3 months correlation between Ventana and Active is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ventana Biotech and Active Health Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Health Foods and Ventana Biotech 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 Ventana Biotech are associated (or correlated) with Active Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Health Foods has no effect on the direction of Ventana Biotech i.e., Ventana Biotech and Active Health go up and down completely randomly.

Pair Corralation between Ventana Biotech and Active Health

Given the investment horizon of 90 days Ventana Biotech is expected to generate 14.21 times more return on investment than Active Health. However, Ventana Biotech is 14.21 times more volatile than Active Health Foods. It trades about 0.15 of its potential returns per unit of risk. Active Health Foods is currently generating about -0.12 per unit of risk. If you would invest  0.21  in Ventana Biotech on September 16, 2024 and sell it today you would lose (0.07) from holding Ventana Biotech or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Ventana Biotech  vs.  Active Health Foods

Ventana Biotech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ventana Biotech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Ventana Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Active Health Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Active Health Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and 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.

Pair Trading with Ventana Biotech and Active Health

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

The idea behind Ventana Biotech and Active Health Foods 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.