Correlation Between Connect Biopharma and Inventiva

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

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

Diversification Opportunities for Connect Biopharma and Inventiva

-0.4

Correlation Coefficient

Connect Biopharma  Inventiva

Very good diversification

The 3 months correlation between Connect and Inventiva is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Connect Biopharma Holdings and Inventiva Sa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inventiva Sa and Connect Biopharma 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 Connect Biopharma Holdings are associated (or correlated) with Inventiva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inventiva Sa has no effect on the direction of Connect Biopharma i.e., Connect Biopharma and Inventiva go up and down completely randomly.

Pair Corralation between Connect Biopharma and Inventiva

Given the investment horizon of 90 days Connect Biopharma is expected to generate 4.35 times less return on investment than Inventiva. In addition to that, Connect Biopharma is 1.05 times more volatile than Inventiva Sa. It trades about 0.02 of its total potential returns per unit of risk. Inventiva Sa is currently generating about 0.09 per unit of volatility. If you would invest  216.00  in Inventiva Sa on August 13, 2024 and sell it today you would earn a total of  61.00  from holding Inventiva Sa or generate 28.24% return on investment over 90 days.

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

Connect Biopharma Holdings  vs.  Inventiva Sa

Connect Biopharma

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Connect Biopharma Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Connect Biopharma may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Inventiva Sa

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inventiva Sa are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Inventiva sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Connect Biopharma and Inventiva

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

The idea behind Connect Biopharma Holdings and Inventiva 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.