Correlation Between Cipher Pharmaceuticals and Medicure

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

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

Diversification Opportunities for Cipher Pharmaceuticals and Medicure

-0.16

Correlation Coefficient

Cipher Pharmaceuticals  Medicure

Good diversification

The 3 months correlation between Cipher and Medicure is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cipher Pharmaceuticals and Medicure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicure and Cipher 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 Cipher Pharmaceuticals are associated (or correlated) with Medicure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicure has no effect on the direction of Cipher Pharmaceuticals i.e., Cipher Pharmaceuticals and Medicure go up and down completely randomly.

Pair Corralation between Cipher Pharmaceuticals and Medicure

Assuming the 90 days trading horizon Cipher Pharmaceuticals is expected to under-perform the Medicure. But the stock apears to be less risky and, when comparing its historical volatility, Cipher Pharmaceuticals is 1.11 times less risky than Medicure. The stock trades about -0.01 of its potential returns per unit of risk. The Medicure is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  92.00  in Medicure on September 14, 2024 and sell it today you would earn a total of  6.00  from holding Medicure or generate 6.52% return on investment over 90 days.

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

Cipher Pharmaceuticals  vs.  Medicure

Cipher Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cipher Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Cipher Pharmaceuticals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Medicure

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medicure are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Medicure may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cipher Pharmaceuticals and Medicure

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

The idea behind Cipher Pharmaceuticals and Medicure 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..