Correlation Between First Wave and Virpax Pharmaceuticals

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

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

Diversification Opportunities for First Wave and Virpax Pharmaceuticals

0.55

Correlation Coefficient

First Wave  Virpax Pharmaceuticals

Very weak diversification

The 3 months correlation between First and Virpax is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Wave BioPharma and Virpax Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virpax Pharmaceuticals and First Wave 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 First Wave BioPharma are associated (or correlated) with Virpax Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virpax Pharmaceuticals has no effect on the direction of First Wave i.e., First Wave and Virpax Pharmaceuticals go up and down completely randomly.

Pair Corralation between First Wave and Virpax Pharmaceuticals

If you would invest  61.00  in First Wave BioPharma on September 15, 2024 and sell it today you would earn a total of  0.00  from holding First Wave BioPharma or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.37%
Values	Daily Returns

First Wave BioPharma  vs.  Virpax Pharmaceuticals

First Wave BioPharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Wave BioPharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, First Wave is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Virpax Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virpax Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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 First Wave and Virpax Pharmaceuticals

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

The idea behind First Wave BioPharma and Virpax Pharmaceuticals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.