Correlation Between Galmed Pharmaceuticals and Kodiak Sciences

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

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

Diversification Opportunities for Galmed Pharmaceuticals and Kodiak Sciences

-0.43

Correlation Coefficient

Galmed Pharmaceuticals  Kodiak Sciences

Very good diversification

The 3 months correlation between Galmed and Kodiak is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Galmed Pharmaceuticals and Kodiak Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Sciences and Galmed 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 Galmed Pharmaceuticals are associated (or correlated) with Kodiak Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Sciences has no effect on the direction of Galmed Pharmaceuticals i.e., Galmed Pharmaceuticals and Kodiak Sciences go up and down completely randomly.

Pair Corralation between Galmed Pharmaceuticals and Kodiak Sciences

Given the investment horizon of 90 days Galmed Pharmaceuticals is expected to generate 5.93 times more return on investment than Kodiak Sciences. However, Galmed Pharmaceuticals is 5.93 times more volatile than Kodiak Sciences. It trades about 0.05 of its potential returns per unit of risk. Kodiak Sciences is currently generating about 0.15 per unit of risk. If you would invest  410.00  in Galmed Pharmaceuticals on September 3, 2024 and sell it today you would lose (124.00) from holding Galmed Pharmaceuticals or give up 30.24% of portfolio value over 90 days.

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

Galmed Pharmaceuticals  vs.  Kodiak Sciences

Galmed Pharmaceuticals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Galmed Pharmaceuticals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Galmed Pharmaceuticals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kodiak Sciences

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Sciences are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Kodiak Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galmed Pharmaceuticals and Kodiak Sciences

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

The idea behind Galmed Pharmaceuticals and Kodiak Sciences 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 Global Correlations module to find global opportunities by holding instruments from different markets.