Correlation Between Molecular Partners and Praxis Precision

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

By analyzing existing cross correlation between Molecular Partners AG and Praxis Precision Medicines, you can compare the effects of market volatilities on Molecular Partners and Praxis Precision 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 Molecular Partners with a short position of Praxis Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molecular Partners and Praxis Precision.

Diversification Opportunities for Molecular Partners and Praxis Precision

0.34

Correlation Coefficient

Molecular Partners  Praxis Precision

Weak diversification

The 3 months correlation between Molecular and Praxis is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Molecular Partners AG and Praxis Precision Medicines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Precision Med and Molecular Partners 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 Molecular Partners AG are associated (or correlated) with Praxis Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Precision Med has no effect on the direction of Molecular Partners i.e., Molecular Partners and Praxis Precision go up and down completely randomly.

Pair Corralation between Molecular Partners and Praxis Precision

Given the investment horizon of 90 days Molecular Partners is expected to generate 5.46 times less return on investment than Praxis Precision. In addition to that, Molecular Partners is 1.9 times more volatile than Praxis Precision Medicines. It trades about 0.01 of its total potential returns per unit of risk. Praxis Precision Medicines is currently generating about 0.12 per unit of volatility. If you would invest  6,071  in Praxis Precision Medicines on September 4, 2024 and sell it today you would earn a total of  1,715  from holding Praxis Precision Medicines or generate 28.25% return on investment over 90 days.

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

Molecular Partners AG  vs.  Praxis Precision Medicines

Molecular Partners

Risk-Adjusted Performance

0 of 100

Very Weak

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

Praxis Precision Med

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Precision Medicines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Praxis Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Molecular Partners and Praxis Precision

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

The idea behind Molecular Partners AG and Praxis Precision Medicines 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.