Correlation Between Red Light and Aequus Pharmaceuticals

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

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

Diversification Opportunities for Red Light and Aequus Pharmaceuticals

-0.45

Correlation Coefficient

Red Light  Aequus Pharmaceuticals

Very good diversification

The 3 months correlation between Red and Aequus is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Red Light Holland and Aequus Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aequus Pharmaceuticals and Red Light 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 Red Light Holland are associated (or correlated) with Aequus Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aequus Pharmaceuticals has no effect on the direction of Red Light i.e., Red Light and Aequus Pharmaceuticals go up and down completely randomly.

Pair Corralation between Red Light and Aequus Pharmaceuticals

Assuming the 90 days horizon Red Light Holland is expected to generate 0.82 times more return on investment than Aequus Pharmaceuticals. However, Red Light Holland is 1.23 times less risky than Aequus Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Aequus Pharmaceuticals is currently generating about -0.1 per unit of risk. If you would invest  2.70  in Red Light Holland on September 19, 2024 and sell it today you would earn a total of  0.00  from holding Red Light Holland or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Red Light Holland  vs.  Aequus Pharmaceuticals

Red Light Holland

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Red Light Holland are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Red Light reported solid returns over the last few months and may actually be approaching a breakup point.

Aequus Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aequus Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 Red Light and Aequus Pharmaceuticals

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

The idea behind Red Light Holland and Aequus 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..