Correlation Between Grindrod and Edgewise Therapeutics

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

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

Diversification Opportunities for Grindrod and Edgewise Therapeutics

0.79

Correlation Coefficient

Grindrod  Edgewise Therapeutics

Poor diversification

The 3 months correlation between Grindrod and Edgewise is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Grindrod Ltd ADR and Edgewise Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewise Therapeutics and Grindrod 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 Grindrod Ltd ADR are associated (or correlated) with Edgewise Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewise Therapeutics has no effect on the direction of Grindrod i.e., Grindrod and Edgewise Therapeutics go up and down completely randomly.

Pair Corralation between Grindrod and Edgewise Therapeutics

Assuming the 90 days horizon Grindrod is expected to generate 91.9 times less return on investment than Edgewise Therapeutics. But when comparing it to its historical volatility, Grindrod Ltd ADR is 84.07 times less risky than Edgewise Therapeutics. It trades about 0.13 of its potential returns per unit of risk. Edgewise Therapeutics is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,757  in Edgewise Therapeutics on September 12, 2024 and sell it today you would earn a total of  1,189  from holding Edgewise Therapeutics or generate 67.67% return on investment over 90 days.

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

Grindrod Ltd ADR  vs.  Edgewise Therapeutics

Grindrod ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grindrod Ltd ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Grindrod is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Edgewise Therapeutics

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewise Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Edgewise Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grindrod and Edgewise Therapeutics

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

The idea behind Grindrod Ltd ADR and Edgewise Therapeutics 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.