Correlation Between Sarepta Therapeutics and Adagene

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

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

Diversification Opportunities for Sarepta Therapeutics and Adagene

0.32

Correlation Coefficient

Sarepta Therapeutics  Adagene

Weak diversification

The 3 months correlation between Sarepta and Adagene is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sarepta Therapeutics and Adagene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adagene and Sarepta 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 Sarepta Therapeutics are associated (or correlated) with Adagene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adagene has no effect on the direction of Sarepta Therapeutics i.e., Sarepta Therapeutics and Adagene go up and down completely randomly.

Pair Corralation between Sarepta Therapeutics and Adagene

Given the investment horizon of 90 days Sarepta Therapeutics is expected to generate 2.75 times less return on investment than Adagene. But when comparing it to its historical volatility, Sarepta Therapeutics is 1.75 times less risky than Adagene. It trades about 0.03 of its potential returns per unit of risk. Adagene is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  137.00  in Adagene on September 13, 2024 and sell it today you would earn a total of  75.00  from holding Adagene or generate 54.74% return on investment over 90 days.

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

Sarepta Therapeutics  vs.  Adagene

Sarepta Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sarepta Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sarepta Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Adagene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adagene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sarepta Therapeutics and Adagene

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

The idea behind Sarepta Therapeutics and Adagene 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.