Correlation Between Processa Pharmaceuticals and CytomX Therapeutics

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

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

Diversification Opportunities for Processa Pharmaceuticals and CytomX Therapeutics

0.81

Correlation Coefficient

Processa Pharmaceuticals  CytomX Therapeutics

Very poor diversification

The 3 months correlation between Processa and CytomX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Processa Pharmaceuticals and CytomX Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CytomX Therapeutics and Processa 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 Processa Pharmaceuticals are associated (or correlated) with CytomX Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CytomX Therapeutics has no effect on the direction of Processa Pharmaceuticals i.e., Processa Pharmaceuticals and CytomX Therapeutics go up and down completely randomly.

Pair Corralation between Processa Pharmaceuticals and CytomX Therapeutics

Given the investment horizon of 90 days Processa Pharmaceuticals is expected to generate 2.31 times less return on investment than CytomX Therapeutics. In addition to that, Processa Pharmaceuticals is 1.34 times more volatile than CytomX Therapeutics. It trades about 0.03 of its total potential returns per unit of risk. CytomX Therapeutics is currently generating about 0.08 per unit of volatility. If you would invest  100.00  in CytomX Therapeutics on September 1, 2024 and sell it today you would earn a total of  6.00  from holding CytomX Therapeutics or generate 6.0% return on investment over 90 days.

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

Processa Pharmaceuticals  vs.  CytomX Therapeutics

Processa Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Processa Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

CytomX Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CytomX Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, CytomX Therapeutics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Processa Pharmaceuticals and CytomX Therapeutics

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

The idea behind Processa Pharmaceuticals and CytomX 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.