Correlation Between Acumen Pharmaceuticals and Cognition Therapeutics

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

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

Diversification Opportunities for Acumen Pharmaceuticals and Cognition Therapeutics

0.31

Correlation Coefficient

Acumen Pharmaceuticals  Cognition Therapeutics

Weak diversification

The 3 months correlation between Acumen and Cognition is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Acumen Pharmaceuticals and Cognition Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognition Therapeutics and Acumen Pharmaceuticals 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 Acumen Pharmaceuticals are associated (or correlated) with Cognition Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognition Therapeutics has no effect on the direction of Acumen Pharmaceuticals i.e., Acumen Pharmaceuticals and Cognition Therapeutics go up and down completely randomly.

Pair Corralation between Acumen Pharmaceuticals and Cognition Therapeutics

Given the investment horizon of 90 days Acumen Pharmaceuticals is expected to generate 0.74 times more return on investment than Cognition Therapeutics. However, Acumen Pharmaceuticals is 1.36 times less risky than Cognition Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Cognition Therapeutics is currently generating about -0.08 per unit of risk. If you would invest  227.00  in Acumen Pharmaceuticals on September 5, 2024 and sell it today you would earn a total of  1.00  from holding Acumen Pharmaceuticals or generate 0.44% return on investment over 90 days.

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

Acumen Pharmaceuticals  vs.  Cognition Therapeutics

Acumen Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acumen Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Acumen Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cognition Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognition Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly 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.

Pair Trading with Acumen Pharmaceuticals and Cognition Therapeutics

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

The idea behind Acumen Pharmaceuticals and Cognition Therapeutics 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.