Correlation Between Intercept Pharmaceuticals and Reata Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Intercept Pharmaceuticals and Reata Pharmaceuticals 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 Intercept Pharmaceuticals and Reata Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intercept Pharmaceuticals and Reata Pharmaceuticals, you can compare the effects of market volatilities on Intercept Pharmaceuticals and Reata Pharmaceuticals 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 Intercept Pharmaceuticals with a short position of Reata Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intercept Pharmaceuticals and Reata Pharmaceuticals.
Diversification Opportunities for Intercept Pharmaceuticals and Reata Pharmaceuticals
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Intercept and Reata is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Intercept Pharmaceuticals and Reata Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reata Pharmaceuticals and Intercept 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 Intercept Pharmaceuticals are associated (or correlated) with Reata Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reata Pharmaceuticals has no effect on the direction of Intercept Pharmaceuticals i.e., Intercept Pharmaceuticals and Reata Pharmaceuticals go up and down completely randomly.
Pair Corralation between Intercept Pharmaceuticals and Reata Pharmaceuticals
Given the investment horizon of 90 days Intercept Pharmaceuticals is expected to under-perform the Reata Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Intercept Pharmaceuticals is 3.26 times less risky than Reata Pharmaceuticals. The stock trades about -0.01 of its potential returns per unit of risk. The Reata Pharmaceuticals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,776 in Reata Pharmaceuticals on August 28, 2024 and sell it today you would earn a total of 7,191 from holding Reata Pharmaceuticals or generate 190.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intercept Pharmaceuticals vs. Reata Pharmaceuticals
Performance |
| Timeline |
| Intercept Pharmaceuticals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Reata Pharmaceuticals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Intercept Pharmaceuticals and Reata Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intercept Pharmaceuticals and Reata Pharmaceuticals
The main advantage of trading using opposite Intercept Pharmaceuticals and Reata Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intercept Pharmaceuticals position performs unexpectedly, Reata Pharmaceuticals 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 Reata Pharmaceuticals will offset losses from the drop in Reata Pharmaceuticals' long position.The idea behind Intercept Pharmaceuticals and Reata Pharmaceuticals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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