Correlation Between Eagle Pharmaceuticals and Rockwell Medical

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

Diversification Opportunities for Eagle Pharmaceuticals and Rockwell Medical

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Eagle and Rockwell is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Pharmaceuticals and Rockwell Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Medical and Eagle 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 Eagle Pharmaceuticals are associated (or correlated) with Rockwell Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Medical has no effect on the direction of Eagle Pharmaceuticals i.e., Eagle Pharmaceuticals and Rockwell Medical go up and down completely randomly.

Pair Corralation between Eagle Pharmaceuticals and Rockwell Medical

Given the investment horizon of 90 days Eagle Pharmaceuticals is expected to under-perform the Rockwell Medical. In addition to that, Eagle Pharmaceuticals is 1.18 times more volatile than Rockwell Medical. It trades about -0.05 of its total potential returns per unit of risk. Rockwell Medical is currently generating about 0.06 per unit of volatility. If you would invest  136.00  in Rockwell Medical on October 20, 2024 and sell it today you would earn a total of  76.00  from holding Rockwell Medical or generate 55.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy71.37%
ValuesDaily Returns

Eagle Pharmaceuticals  vs.  Rockwell Medical

 Performance 
       Timeline  
Eagle Pharmaceuticals 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Eagle Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Eagle Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Rockwell Medical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Rockwell Medical 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 fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Eagle Pharmaceuticals and Rockwell Medical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eagle Pharmaceuticals and Rockwell Medical

The main advantage of trading using opposite Eagle Pharmaceuticals and Rockwell Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Pharmaceuticals position performs unexpectedly, Rockwell Medical 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 Rockwell Medical will offset losses from the drop in Rockwell Medical's long position.
The idea behind Eagle Pharmaceuticals and Rockwell Medical 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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