Correlation Between Fennec Pharmaceuticals and Covalon Technologies

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

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

Diversification Opportunities for Fennec Pharmaceuticals and Covalon Technologies

-0.35

Correlation Coefficient

Fennec Pharmaceuticals  Covalon Technologies

Very good diversification

The 3 months correlation between Fennec and Covalon is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fennec Pharmaceuticals and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies and Fennec 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 Fennec Pharmaceuticals are associated (or correlated) with Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of Fennec Pharmaceuticals i.e., Fennec Pharmaceuticals and Covalon Technologies go up and down completely randomly.

Pair Corralation between Fennec Pharmaceuticals and Covalon Technologies

Given the investment horizon of 90 days Fennec Pharmaceuticals is expected to generate 1.59 times more return on investment than Covalon Technologies. However, Fennec Pharmaceuticals is 1.59 times more volatile than Covalon Technologies. It trades about 0.05 of its potential returns per unit of risk. Covalon Technologies is currently generating about 0.05 per unit of risk. If you would invest  557.00  in Fennec Pharmaceuticals on August 30, 2024 and sell it today you would earn a total of  44.00  from holding Fennec Pharmaceuticals or generate 7.9% return on investment over 90 days.

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

Fennec Pharmaceuticals  vs.  Covalon Technologies

Fennec Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fennec Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Fennec Pharmaceuticals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Covalon Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Covalon Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Covalon Technologies may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Fennec Pharmaceuticals and Covalon Technologies

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

The idea behind Fennec Pharmaceuticals and Covalon Technologies 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.