Correlation Between Eagle Pharmaceuticals and Durect

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

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

Diversification Opportunities for Eagle Pharmaceuticals and Durect

0.25

Correlation Coefficient

Eagle Pharmaceuticals  Durect

Modest diversification

The 3 months correlation between Eagle and Durect is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Pharmaceuticals and Durect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Durect and Eagle 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 Eagle Pharmaceuticals 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 Eagle Pharmaceuticals i.e., Eagle Pharmaceuticals and Durect go up and down completely randomly.

Pair Corralation between Eagle Pharmaceuticals and Durect

Given the investment horizon of 90 days Eagle Pharmaceuticals is expected to under-perform the Durect. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Pharmaceuticals is 1.66 times less risky than Durect. The stock trades about -0.09 of its potential returns per unit of risk. The Durect is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  426.00  in Durect on January 26, 2024 and sell it today you would lose (337.65) from holding Durect or give up 79.26% of portfolio value over 90 days.

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

Eagle Pharmaceuticals  vs.  Durect

Eagle Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Durect

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Durect are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Durect showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Pharmaceuticals and Durect

The main advantage of trading using opposite Eagle Pharmaceuticals and Durect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Pharmaceuticals 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 Eagle Pharmaceuticals 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.