Correlation Between Pharmadrug and Revive Therapeutics

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

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

Diversification Opportunities for Pharmadrug and Revive Therapeutics

-0.14

Correlation Coefficient

Pharmadrug  Revive Therapeutics

Good diversification

The 3 months correlation between Pharmadrug and Revive is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Pharmadrug and Revive Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revive Therapeutics and Pharmadrug 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 Pharmadrug are associated (or correlated) with Revive Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revive Therapeutics has no effect on the direction of Pharmadrug i.e., Pharmadrug and Revive Therapeutics go up and down completely randomly.

Pair Corralation between Pharmadrug and Revive Therapeutics

Assuming the 90 days horizon Pharmadrug is expected to generate 1.7 times more return on investment than Revive Therapeutics. However, Pharmadrug is 1.7 times more volatile than Revive Therapeutics. It trades about 0.03 of its potential returns per unit of risk. Revive Therapeutics is currently generating about 0.0 per unit of risk. If you would invest  1.51  in Pharmadrug on September 13, 2024 and sell it today you would lose (0.76) from holding Pharmadrug or give up 50.33% of portfolio value over 90 days.

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

Pharmadrug  vs.  Revive Therapeutics

Pharmadrug

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmadrug are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Pharmadrug reported solid returns over the last few months and may actually be approaching a breakup point.

Revive Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Revive Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Revive Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pharmadrug and Revive Therapeutics

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

The idea behind Pharmadrug and Revive 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.