Correlation Between Newron Pharmaceuticals and Molecular Partners

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

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

Diversification Opportunities for Newron Pharmaceuticals and Molecular Partners

0.27

Correlation Coefficient

Newron Pharmaceuticals  Molecular Partners

Modest diversification

The 3 months correlation between Newron and Molecular is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Newron Pharmaceuticals SpA and Molecular Partners AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molecular Partners and Newron Pharmaceuticals 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 Newron Pharmaceuticals SpA are associated (or correlated) with Molecular Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molecular Partners has no effect on the direction of Newron Pharmaceuticals i.e., Newron Pharmaceuticals and Molecular Partners go up and down completely randomly.

Pair Corralation between Newron Pharmaceuticals and Molecular Partners

Assuming the 90 days trading horizon Newron Pharmaceuticals is expected to generate 1.51 times less return on investment than Molecular Partners. But when comparing it to its historical volatility, Newron Pharmaceuticals SpA is 1.51 times less risky than Molecular Partners. It trades about 0.07 of its potential returns per unit of risk. Molecular Partners AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Molecular Partners AG on September 26, 2024 and sell it today you would earn a total of  63.00  from holding Molecular Partners AG or generate 15.75% return on investment over 90 days.

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

Newron Pharmaceuticals SpA  vs.  Molecular Partners AG

Newron Pharmaceuticals

Risk-Adjusted Performance

5 of 100

Modest

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

Molecular Partners

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Newron Pharmaceuticals and Molecular Partners

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

The idea behind Newron Pharmaceuticals SpA and Molecular Partners AG 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.