Correlation Between Aeterna Zentaris and Medicenna TherapeuticsCorp

Can any of the company-specific risk be diversified away by investing in both Aeterna Zentaris and Medicenna TherapeuticsCorp 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 Aeterna Zentaris and Medicenna TherapeuticsCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Aeterna Zentaris and Medicenna TherapeuticsCorp

0.6

Correlation Coefficient

Aeterna Zentaris  Medicenna TherapeuticsCorp

Poor diversification

The 3 months correlation between Aeterna and Medicenna is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aeterna Zentaris and Medicenna TherapeuticsCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicenna TherapeuticsCorp and Aeterna Zentaris 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 Aeterna Zentaris are associated (or correlated) with Medicenna TherapeuticsCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicenna TherapeuticsCorp has no effect on the direction of Aeterna Zentaris i.e., Aeterna Zentaris and Medicenna TherapeuticsCorp go up and down completely randomly.

Pair Corralation between Aeterna Zentaris and Medicenna TherapeuticsCorp

Assuming the 90 days trading horizon Aeterna Zentaris is expected to under-perform the Medicenna TherapeuticsCorp. But the stock apears to be less risky and, when comparing its historical volatility, Aeterna Zentaris is 4.18 times less risky than Medicenna TherapeuticsCorp. The stock trades about -0.11 of its potential returns per unit of risk. The Medicenna TherapeuticsCorp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  153.00  in Medicenna TherapeuticsCorp on January 16, 2024 and sell it today you would earn a total of  36.00  from holding Medicenna TherapeuticsCorp or generate 23.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Aeterna Zentaris  vs.  Medicenna TherapeuticsCorp

Aeterna Zentaris

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeterna Zentaris are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Aeterna Zentaris may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Medicenna TherapeuticsCorp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medicenna TherapeuticsCorp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medicenna TherapeuticsCorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeterna Zentaris and Medicenna TherapeuticsCorp

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

The idea behind Aeterna Zentaris and Medicenna TherapeuticsCorp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.