Correlation Between Adagene and Hillstream Biopharma

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Can any of the company-specific risk be diversified away by investing in both Adagene and Hillstream Biopharma 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 Adagene and Hillstream Biopharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adagene and Hillstream Biopharma, you can compare the effects of market volatilities on Adagene and Hillstream Biopharma 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 Adagene with a short position of Hillstream Biopharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adagene and Hillstream Biopharma.

Diversification Opportunities for Adagene and Hillstream Biopharma

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Adagene and Hillstream is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Adagene and Hillstream Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillstream Biopharma and Adagene 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 Adagene are associated (or correlated) with Hillstream Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillstream Biopharma has no effect on the direction of Adagene i.e., Adagene and Hillstream Biopharma go up and down completely randomly.

Pair Corralation between Adagene and Hillstream Biopharma

Given the investment horizon of 90 days Adagene is expected to generate 1.06 times less return on investment than Hillstream Biopharma. In addition to that, Adagene is 1.24 times more volatile than Hillstream Biopharma. It trades about 0.06 of its total potential returns per unit of risk. Hillstream Biopharma is currently generating about 0.08 per unit of volatility. If you would invest  36.00  in Hillstream Biopharma on September 1, 2024 and sell it today you would earn a total of  3.00  from holding Hillstream Biopharma or generate 8.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy8.06%
ValuesDaily Returns

Adagene  vs.  Hillstream Biopharma

 Performance 
       Timeline  
Adagene 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Adagene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Hillstream Biopharma 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Hillstream Biopharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Hillstream Biopharma is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Adagene and Hillstream Biopharma Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adagene and Hillstream Biopharma

The main advantage of trading using opposite Adagene and Hillstream Biopharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adagene position performs unexpectedly, Hillstream Biopharma 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 Hillstream Biopharma will offset losses from the drop in Hillstream Biopharma's long position.
The idea behind Adagene and Hillstream Biopharma 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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