Correlation Between Eterna Therapeutics and ACADIA Pharmaceuticals

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

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

Diversification Opportunities for Eterna Therapeutics and ACADIA Pharmaceuticals

-0.5

Correlation Coefficient

Eterna Therapeutics  ACADIA Pharmaceuticals

Very good diversification

The 3 months correlation between Eterna and ACADIA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Eterna Therapeutics and ACADIA Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACADIA Pharmaceuticals and Eterna Therapeutics 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 Eterna Therapeutics are associated (or correlated) with ACADIA Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACADIA Pharmaceuticals has no effect on the direction of Eterna Therapeutics i.e., Eterna Therapeutics and ACADIA Pharmaceuticals go up and down completely randomly.

Pair Corralation between Eterna Therapeutics and ACADIA Pharmaceuticals

Given the investment horizon of 90 days Eterna Therapeutics is expected to generate 1.76 times more return on investment than ACADIA Pharmaceuticals. However, Eterna Therapeutics is 1.76 times more volatile than ACADIA Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. ACADIA Pharmaceuticals is currently generating about -0.05 per unit of risk. If you would invest  99.00  in Eterna Therapeutics on February 24, 2024 and sell it today you would earn a total of  100.00  from holding Eterna Therapeutics or generate 101.01% return on investment over 90 days.

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

Eterna Therapeutics  vs.  ACADIA Pharmaceuticals

Eterna Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eterna Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eterna Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Eterna Therapeutics and ACADIA Pharmaceuticals

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

The idea behind Eterna Therapeutics and ACADIA Pharmaceuticals 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 Commodity Directory module to find actively traded commodities issued by global exchanges.