Correlation Between COSMO Pharmaceuticals and Addex Therapeutics
Can any of the company-specific risk be diversified away by investing in both COSMO Pharmaceuticals and Addex Therapeutics 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 COSMO Pharmaceuticals and Addex Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COSMO Pharmaceuticals SA and Addex Therapeutics, you can compare the effects of market volatilities on COSMO Pharmaceuticals and Addex Therapeutics 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 COSMO Pharmaceuticals with a short position of Addex Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSMO Pharmaceuticals and Addex Therapeutics.
Diversification Opportunities for COSMO Pharmaceuticals and Addex Therapeutics
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between COSMO and Addex is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding COSMO Pharmaceuticals SA and Addex Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addex Therapeutics and COSMO Pharmaceuticals 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 COSMO Pharmaceuticals SA are associated (or correlated) with Addex Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addex Therapeutics has no effect on the direction of COSMO Pharmaceuticals i.e., COSMO Pharmaceuticals and Addex Therapeutics go up and down completely randomly.
Pair Corralation between COSMO Pharmaceuticals and Addex Therapeutics
Assuming the 90 days trading horizon COSMO Pharmaceuticals SA is expected to under-perform the Addex Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, COSMO Pharmaceuticals SA is 4.5 times less risky than Addex Therapeutics. The stock trades about -0.05 of its potential returns per unit of risk. The Addex Therapeutics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 6.90 in Addex Therapeutics on August 31, 2024 and sell it today you would lose (0.70) from holding Addex Therapeutics or give up 10.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
COSMO Pharmaceuticals SA vs. Addex Therapeutics
Performance |
| Timeline |
| COSMO Pharmaceuticals |
| Addex Therapeutics |
COSMO Pharmaceuticals and Addex Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COSMO Pharmaceuticals and Addex Therapeutics
The main advantage of trading using opposite COSMO Pharmaceuticals and Addex Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSMO Pharmaceuticals position performs unexpectedly, Addex Therapeutics 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 Addex Therapeutics will offset losses from the drop in Addex Therapeutics' long position.The idea behind COSMO Pharmaceuticals SA and Addex Therapeutics 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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