Correlation Between Lyra Therapeutics and Diffusion Pharmaceuticals

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

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

Diversification Opportunities for Lyra Therapeutics and Diffusion Pharmaceuticals

0.65

Correlation Coefficient

Lyra Therapeutics  Diffusion Pharmaceuticals

Poor diversification

The 3 months correlation between Lyra and Diffusion is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lyra Therapeutics and Diffusion Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diffusion Pharmaceuticals and Lyra Therapeutics 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 Lyra Therapeutics are associated (or correlated) with Diffusion Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diffusion Pharmaceuticals has no effect on the direction of Lyra Therapeutics i.e., Lyra Therapeutics and Diffusion Pharmaceuticals go up and down completely randomly.

Pair Corralation between Lyra Therapeutics and Diffusion Pharmaceuticals

If you would invest  327.00  in Diffusion Pharmaceuticals on September 1, 2024 and sell it today you would earn a total of  0.00  from holding Diffusion Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Lyra Therapeutics  vs.  Diffusion Pharmaceuticals

Lyra Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyra Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Diffusion Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diffusion Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Diffusion Pharmaceuticals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lyra Therapeutics and Diffusion Pharmaceuticals

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

The idea behind Lyra Therapeutics and Diffusion Pharmaceuticals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.