Correlation Between Replimune and Eledon Pharmaceuticals

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

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

Diversification Opportunities for Replimune and Eledon Pharmaceuticals

0.6

Correlation Coefficient

Replimune  Eledon Pharmaceuticals

Poor diversification

The 3 months correlation between Replimune and Eledon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Replimune Group and Eledon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eledon Pharmaceuticals and Replimune 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 Replimune Group are associated (or correlated) with Eledon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eledon Pharmaceuticals has no effect on the direction of Replimune i.e., Replimune and Eledon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Replimune and Eledon Pharmaceuticals

Given the investment horizon of 90 days Replimune is expected to generate 1.71 times less return on investment than Eledon Pharmaceuticals. In addition to that, Replimune is 1.16 times more volatile than Eledon Pharmaceuticals. It trades about 0.1 of its total potential returns per unit of risk. Eledon Pharmaceuticals is currently generating about 0.19 per unit of volatility. If you would invest  258.00  in Eledon Pharmaceuticals on September 4, 2024 and sell it today you would earn a total of  179.00  from holding Eledon Pharmaceuticals or generate 69.38% return on investment over 90 days.

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

Replimune Group  vs.  Eledon Pharmaceuticals

Replimune Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Replimune Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Replimune disclosed solid returns over the last few months and may actually be approaching a breakup point.

Eledon Pharmaceuticals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eledon Pharmaceuticals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Eledon Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Replimune and Eledon Pharmaceuticals

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

The idea behind Replimune Group and Eledon 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.