Correlation Between ACADIA Pharmaceuticals and Aadi Bioscience

Can any of the company-specific risk be diversified away by investing in both ACADIA Pharmaceuticals and Aadi Bioscience 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 ACADIA Pharmaceuticals and Aadi Bioscience into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for ACADIA Pharmaceuticals and Aadi Bioscience

-0.54

Correlation Coefficient

ACADIA Pharmaceuticals  Aadi Bioscience

Excellent diversification

The 3 months correlation between ACADIA and Aadi is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding ACADIA Pharmaceuticals and Aadi Bioscience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aadi Bioscience and ACADIA 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 ACADIA Pharmaceuticals are associated (or correlated) with Aadi Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aadi Bioscience has no effect on the direction of ACADIA Pharmaceuticals i.e., ACADIA Pharmaceuticals and Aadi Bioscience go up and down completely randomly.

Pair Corralation between ACADIA Pharmaceuticals and Aadi Bioscience

Given the investment horizon of 90 days ACADIA Pharmaceuticals is expected to generate 0.46 times more return on investment than Aadi Bioscience. However, ACADIA Pharmaceuticals is 2.18 times less risky than Aadi Bioscience. It trades about -0.23 of its potential returns per unit of risk. Aadi Bioscience is currently generating about -0.27 per unit of risk. If you would invest  1,784  in ACADIA Pharmaceuticals on January 25, 2024 and sell it today you would lose (125.00) from holding ACADIA Pharmaceuticals or give up 7.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ACADIA Pharmaceuticals  vs.  Aadi Bioscience

ACADIA Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACADIA Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Aadi Bioscience

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aadi Bioscience are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Aadi Bioscience may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ACADIA Pharmaceuticals and Aadi Bioscience

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

The idea behind ACADIA Pharmaceuticals and Aadi Bioscience 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.