Correlation Between ARCA Biopharma and Abeona Therapeutics

Can any of the company-specific risk be diversified away by investing in both ARCA Biopharma and Abeona 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 ARCA Biopharma and Abeona Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARCA Biopharma and Abeona Therapeutics, you can compare the effects of market volatilities on ARCA Biopharma and Abeona 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 ARCA Biopharma with a short position of Abeona Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARCA Biopharma and Abeona Therapeutics.

Diversification Opportunities for ARCA Biopharma and Abeona Therapeutics

0.37

Correlation Coefficient

ARCA Biopharma  Abeona Therapeutics

Weak diversification

The 3 months correlation between ARCA and Abeona is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ARCA Biopharma and Abeona Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abeona Therapeutics and ARCA Biopharma 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 ARCA Biopharma are associated (or correlated) with Abeona Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abeona Therapeutics has no effect on the direction of ARCA Biopharma i.e., ARCA Biopharma and Abeona Therapeutics go up and down completely randomly.

Pair Corralation between ARCA Biopharma and Abeona Therapeutics

Given the investment horizon of 90 days ARCA Biopharma is expected to generate 2.03 times more return on investment than Abeona Therapeutics. However, ARCA Biopharma is 2.03 times more volatile than Abeona Therapeutics. It trades about 0.15 of its potential returns per unit of risk. Abeona Therapeutics is currently generating about 0.15 per unit of risk. If you would invest  159.00  in ARCA Biopharma on January 24, 2024 and sell it today you would earn a total of  186.00  from holding ARCA Biopharma or generate 116.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

ARCA Biopharma  vs.  Abeona Therapeutics

ARCA Biopharma

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ARCA Biopharma are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, ARCA Biopharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Abeona Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Abeona Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Abeona Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARCA Biopharma and Abeona Therapeutics

The main advantage of trading using opposite ARCA Biopharma and Abeona Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARCA Biopharma position performs unexpectedly, Abeona 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 Abeona Therapeutics will offset losses from the drop in Abeona Therapeutics' long position.

The idea behind ARCA Biopharma and Abeona 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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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.