Correlation Between Harmony Biosciences and MediciNova

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

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

Diversification Opportunities for Harmony Biosciences and MediciNova

0.06

Correlation Coefficient

Harmony Biosciences  MediciNova

Significant diversification

The 3 months correlation between Harmony and MediciNova is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Biosciences Holdings and MediciNova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediciNova and Harmony Biosciences 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 Harmony Biosciences Holdings are associated (or correlated) with MediciNova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediciNova has no effect on the direction of Harmony Biosciences i.e., Harmony Biosciences and MediciNova go up and down completely randomly.

Pair Corralation between Harmony Biosciences and MediciNova

Given the investment horizon of 90 days Harmony Biosciences Holdings is expected to under-perform the MediciNova. But the stock apears to be less risky and, when comparing its historical volatility, Harmony Biosciences Holdings is 1.88 times less risky than MediciNova. The stock trades about -0.03 of its potential returns per unit of risk. The MediciNova is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  210.00  in MediciNova on August 31, 2024 and sell it today you would lose (9.00) from holding MediciNova or give up 4.29% of portfolio value over 90 days.

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

Harmony Biosciences Holdings  vs.  MediciNova

Harmony Biosciences

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Harmony Biosciences Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Harmony Biosciences is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

MediciNova

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MediciNova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Biosciences and MediciNova

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

The idea behind Harmony Biosciences Holdings and MediciNova 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.