Correlation Between Trevena and Clearside Biomedical

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

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

Diversification Opportunities for Trevena and Clearside Biomedical

0.47

Correlation Coefficient

Trevena  Clearside Biomedical

Very weak diversification

The 3 months correlation between Trevena and Clearside is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Trevena and Clearside Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearside Biomedical and Trevena 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 Trevena are associated (or correlated) with Clearside Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearside Biomedical has no effect on the direction of Trevena i.e., Trevena and Clearside Biomedical go up and down completely randomly.

Pair Corralation between Trevena and Clearside Biomedical

Given the investment horizon of 90 days Trevena is expected to under-perform the Clearside Biomedical. In addition to that, Trevena is 3.49 times more volatile than Clearside Biomedical. It trades about -0.2 of its total potential returns per unit of risk. Clearside Biomedical is currently generating about -0.05 per unit of volatility. If you would invest  123.00  in Clearside Biomedical on September 13, 2024 and sell it today you would lose (22.00) from holding Clearside Biomedical or give up 17.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	36.51%
Values	Daily Returns

Trevena  vs.  Clearside Biomedical

Trevena

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trevena has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Clearside Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearside Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Trevena and Clearside Biomedical

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

The idea behind Trevena and Clearside Biomedical 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.