Correlation Between Heron Therapeuti and BioXcel Therapeutics

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Can any of the company-specific risk be diversified away by investing in both Heron Therapeuti and BioXcel 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 Heron Therapeuti and BioXcel Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heron Therapeuti and BioXcel Therapeutics, you can compare the effects of market volatilities on Heron Therapeuti and BioXcel 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 Heron Therapeuti with a short position of BioXcel Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heron Therapeuti and BioXcel Therapeutics.

Diversification Opportunities for Heron Therapeuti and BioXcel Therapeutics

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Heron and BioXcel is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Heron Therapeuti and BioXcel Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioXcel Therapeutics and Heron Therapeuti 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 Heron Therapeuti are associated (or correlated) with BioXcel Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioXcel Therapeutics has no effect on the direction of Heron Therapeuti i.e., Heron Therapeuti and BioXcel Therapeutics go up and down completely randomly.

Pair Corralation between Heron Therapeuti and BioXcel Therapeutics

Given the investment horizon of 90 days Heron Therapeuti is expected to generate 0.81 times more return on investment than BioXcel Therapeutics. However, Heron Therapeuti is 1.24 times less risky than BioXcel Therapeutics. It trades about -0.09 of its potential returns per unit of risk. BioXcel Therapeutics is currently generating about -0.07 per unit of risk. If you would invest  173.00  in Heron Therapeuti on September 3, 2024 and sell it today you would lose (54.00) from holding Heron Therapeuti or give up 31.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Heron Therapeuti  vs.  BioXcel Therapeutics

 Performance 
       Timeline  
Heron Therapeuti 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Heron Therapeuti has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.
BioXcel Therapeutics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BioXcel Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating 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 recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Heron Therapeuti and BioXcel Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Heron Therapeuti and BioXcel Therapeutics

The main advantage of trading using opposite Heron Therapeuti and BioXcel Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heron Therapeuti position performs unexpectedly, BioXcel 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 BioXcel Therapeutics will offset losses from the drop in BioXcel Therapeutics' long position.
The idea behind Heron Therapeuti and BioXcel 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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