Correlation Between Bicycle Therapeutics and Adagene

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

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

Diversification Opportunities for Bicycle Therapeutics and Adagene

0.28

Correlation Coefficient

Bicycle Therapeutics  Adagene

Modest diversification

The 3 months correlation between Bicycle and Adagene is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bicycle Therapeutics and Adagene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adagene and Bicycle Therapeutics 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 Bicycle Therapeutics are associated (or correlated) with Adagene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adagene has no effect on the direction of Bicycle Therapeutics i.e., Bicycle Therapeutics and Adagene go up and down completely randomly.

Pair Corralation between Bicycle Therapeutics and Adagene

Given the investment horizon of 90 days Bicycle Therapeutics is expected to generate 0.72 times more return on investment than Adagene. However, Bicycle Therapeutics is 1.39 times less risky than Adagene. It trades about 0.01 of its potential returns per unit of risk. Adagene is currently generating about -0.03 per unit of risk. If you would invest  2,083  in Bicycle Therapeutics on September 3, 2024 and sell it today you would lose (43.00) from holding Bicycle Therapeutics or give up 2.06% of portfolio value over 90 days.

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

Bicycle Therapeutics  vs.  Adagene

Bicycle Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bicycle Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bicycle Therapeutics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Adagene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adagene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bicycle Therapeutics and Adagene

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

The idea behind Bicycle Therapeutics and Adagene 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.