Correlation Between Edgewise Therapeutics and Addex Therapeutics

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

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

Diversification Opportunities for Edgewise Therapeutics and Addex Therapeutics

-0.57

Correlation Coefficient

Edgewise Therapeutics  Addex Therapeutics

Excellent diversification

The 3 months correlation between Edgewise and Addex is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Edgewise Therapeutics and Addex Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addex Therapeutics and Edgewise 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 Edgewise Therapeutics are associated (or correlated) with Addex Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addex Therapeutics has no effect on the direction of Edgewise Therapeutics i.e., Edgewise Therapeutics and Addex Therapeutics go up and down completely randomly.

Pair Corralation between Edgewise Therapeutics and Addex Therapeutics

Given the investment horizon of 90 days Edgewise Therapeutics is expected to generate 3.67 times less return on investment than Addex Therapeutics. But when comparing it to its historical volatility, Edgewise Therapeutics is 2.68 times less risky than Addex Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Addex Therapeutics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  905.00  in Addex Therapeutics on March 1, 2024 and sell it today you would lose (41.00) from holding Addex Therapeutics or give up 4.53% of portfolio value over 90 days.

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

Edgewise Therapeutics  vs.  Addex Therapeutics

Edgewise Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewise Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Edgewise Therapeutics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Addex Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Edgewise Therapeutics and Addex Therapeutics

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

The idea behind Edgewise Therapeutics and Addex Therapeutics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.