Correlation Between Alimera Sciences and Durect

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

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

Diversification Opportunities for Alimera Sciences and Durect

0.16

Correlation Coefficient

Alimera Sciences  Durect

Average diversification

The 3 months correlation between Alimera and Durect is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Alimera Sciences and Durect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Durect and Alimera Sciences 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 Alimera Sciences are associated (or correlated) with Durect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Durect has no effect on the direction of Alimera Sciences i.e., Alimera Sciences and Durect go up and down completely randomly.

Pair Corralation between Alimera Sciences and Durect

Given the investment horizon of 90 days Alimera Sciences is expected to generate 0.5 times more return on investment than Durect. However, Alimera Sciences is 2.0 times less risky than Durect. It trades about 0.05 of its potential returns per unit of risk. Durect is currently generating about -0.04 per unit of risk. If you would invest  254.00  in Alimera Sciences on January 19, 2024 and sell it today you would earn a total of  90.00  from holding Alimera Sciences or generate 35.43% return on investment over 90 days.

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

Alimera Sciences  vs.  Durect

Alimera Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alimera Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Durect

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Durect are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Durect showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alimera Sciences and Durect

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

The idea behind Alimera Sciences and Durect 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.