Correlation Between Cidara Therapeutics and Aldeyra

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

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

Diversification Opportunities for Cidara Therapeutics and Aldeyra

-0.56

Correlation Coefficient

Cidara Therapeutics  Aldeyra

Excellent diversification

The 3 months correlation between Cidara and Aldeyra is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cidara Therapeutics and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra and Cidara 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 Cidara Therapeutics are associated (or correlated) with Aldeyra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldeyra has no effect on the direction of Cidara Therapeutics i.e., Cidara Therapeutics and Aldeyra go up and down completely randomly.

Pair Corralation between Cidara Therapeutics and Aldeyra

Given the investment horizon of 90 days Cidara Therapeutics is expected to generate 1.16 times more return on investment than Aldeyra. However, Cidara Therapeutics is 1.16 times more volatile than Aldeyra. It trades about 0.36 of its potential returns per unit of risk. Aldeyra is currently generating about -0.06 per unit of risk. If you would invest  1,339  in Cidara Therapeutics on August 30, 2024 and sell it today you would earn a total of  681.00  from holding Cidara Therapeutics or generate 50.86% return on investment over 90 days.

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

Cidara Therapeutics  vs.  Aldeyra

Cidara Therapeutics

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cidara Therapeutics are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Cidara Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Aldeyra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aldeyra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Cidara Therapeutics and Aldeyra

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

The idea behind Cidara Therapeutics and Aldeyra 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.