Correlation Between EMCORE and ADC Therapeutics
Can any of the company-specific risk be diversified away by investing in both EMCORE and ADC 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 EMCORE and ADC Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCORE and ADC Therapeutics SA, you can compare the effects of market volatilities on EMCORE and ADC 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 EMCORE with a short position of ADC Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCORE and ADC Therapeutics.
Diversification Opportunities for EMCORE and ADC Therapeutics
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between EMCORE and ADC is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and ADC Therapeutics SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADC Therapeutics and EMCORE 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 EMCORE are associated (or correlated) with ADC Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADC Therapeutics has no effect on the direction of EMCORE i.e., EMCORE and ADC Therapeutics go up and down completely randomly.
Pair Corralation between EMCORE and ADC Therapeutics
Given the investment horizon of 90 days EMCORE is expected to generate 0.16 times more return on investment than ADC Therapeutics. However, EMCORE is 6.15 times less risky than ADC Therapeutics. It trades about 0.1 of its potential returns per unit of risk. ADC Therapeutics SA is currently generating about -0.16 per unit of risk. If you would invest 296.00 in EMCORE on October 20, 2024 and sell it today you would earn a total of 4.00 from holding EMCORE or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCORE vs. ADC Therapeutics SA
Performance |
| Timeline |
| EMCORE |
| ADC Therapeutics |
EMCORE and ADC Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCORE and ADC Therapeutics
The main advantage of trading using opposite EMCORE and ADC Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCORE position performs unexpectedly, ADC 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 ADC Therapeutics will offset losses from the drop in ADC Therapeutics' long position.The idea behind EMCORE and ADC Therapeutics SA 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.| ADC Therapeutics vs. Passage Bio | ADC Therapeutics vs. Black Diamond Therapeutics | ADC Therapeutics vs. Alector | ADC Therapeutics vs. Century Therapeutics |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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