Correlation Between LENSAR and Avadel Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both LENSAR and Avadel 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 LENSAR and Avadel Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LENSAR Inc and Avadel Pharmaceuticals PLC, you can compare the effects of market volatilities on LENSAR and Avadel 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 LENSAR with a short position of Avadel Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENSAR and Avadel Pharmaceuticals.
Diversification Opportunities for LENSAR and Avadel Pharmaceuticals
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LENSAR and Avadel is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals and LENSAR 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 LENSAR Inc are associated (or correlated) with Avadel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avadel Pharmaceuticals has no effect on the direction of LENSAR i.e., LENSAR and Avadel Pharmaceuticals go up and down completely randomly.
Pair Corralation between LENSAR and Avadel Pharmaceuticals
Given the investment horizon of 90 days LENSAR Inc is expected to generate 1.38 times more return on investment than Avadel Pharmaceuticals. However, LENSAR is 1.38 times more volatile than Avadel Pharmaceuticals PLC. It trades about 0.15 of its potential returns per unit of risk. Avadel Pharmaceuticals PLC is currently generating about -0.09 per unit of risk. If you would invest 321.00 in LENSAR Inc on September 3, 2024 and sell it today you would earn a total of 432.00 from holding LENSAR Inc or generate 134.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LENSAR Inc vs. Avadel Pharmaceuticals PLC
Performance |
| Timeline |
| LENSAR Inc |
| Avadel Pharmaceuticals |
LENSAR and Avadel Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LENSAR and Avadel Pharmaceuticals
The main advantage of trading using opposite LENSAR and Avadel Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR position performs unexpectedly, Avadel 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 Avadel Pharmaceuticals will offset losses from the drop in Avadel Pharmaceuticals' long position.The idea behind LENSAR Inc and Avadel Pharmaceuticals PLC 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.| Avadel Pharmaceuticals vs. Neurocrine Biosciences | Avadel Pharmaceuticals vs. Ironwood Pharmaceuticals | Avadel Pharmaceuticals vs. Alkermes Plc | Avadel Pharmaceuticals vs. Intracellular Th |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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