Correlation Between Adaptimmune Therapeutics and Edesa Biotech
Can any of the company-specific risk be diversified away by investing in both Adaptimmune Therapeutics and Edesa Biotech 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 Adaptimmune Therapeutics and Edesa Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adaptimmune Therapeutics Plc and Edesa Biotech, you can compare the effects of market volatilities on Adaptimmune Therapeutics and Edesa Biotech 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 Adaptimmune Therapeutics with a short position of Edesa Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaptimmune Therapeutics and Edesa Biotech.
Diversification Opportunities for Adaptimmune Therapeutics and Edesa Biotech
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adaptimmune and Edesa is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Adaptimmune Therapeutics Plc and Edesa Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edesa Biotech and Adaptimmune 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 Adaptimmune Therapeutics Plc are associated (or correlated) with Edesa Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edesa Biotech has no effect on the direction of Adaptimmune Therapeutics i.e., Adaptimmune Therapeutics and Edesa Biotech go up and down completely randomly.
Pair Corralation between Adaptimmune Therapeutics and Edesa Biotech
Given the investment horizon of 90 days Adaptimmune Therapeutics Plc is expected to generate 1.19 times more return on investment than Edesa Biotech. However, Adaptimmune Therapeutics is 1.19 times more volatile than Edesa Biotech. It trades about 0.02 of its potential returns per unit of risk. Edesa Biotech is currently generating about -0.05 per unit of risk. If you would invest 71.00 in Adaptimmune Therapeutics Plc on November 9, 2024 and sell it today you would lose (10.00) from holding Adaptimmune Therapeutics Plc or give up 14.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adaptimmune Therapeutics Plc vs. Edesa Biotech
Performance |
| Timeline |
| Adaptimmune Therapeutics |
| Edesa Biotech |
Adaptimmune Therapeutics and Edesa Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adaptimmune Therapeutics and Edesa Biotech
The main advantage of trading using opposite Adaptimmune Therapeutics and Edesa Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaptimmune Therapeutics position performs unexpectedly, Edesa Biotech 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 Edesa Biotech will offset losses from the drop in Edesa Biotech's long position.The idea behind Adaptimmune Therapeutics Plc and Edesa Biotech 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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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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