Correlation Between Gain Therapeutics and Avadel Pharmaceuticals

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

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

Diversification Opportunities for Gain Therapeutics and Avadel Pharmaceuticals

-0.54

Correlation Coefficient

Gain Therapeutics  Avadel Pharmaceuticals

Excellent diversification

The 3 months correlation between Gain and Avadel is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gain Therapeutics and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals and Gain 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 Gain Therapeutics are associated (or correlated) with Avadel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avadel Pharmaceuticals has no effect on the direction of Gain Therapeutics i.e., Gain Therapeutics and Avadel Pharmaceuticals go up and down completely randomly.

Pair Corralation between Gain Therapeutics and Avadel Pharmaceuticals

Given the investment horizon of 90 days Gain Therapeutics is expected to generate 140.09 times less return on investment than Avadel Pharmaceuticals. But when comparing it to its historical volatility, Gain Therapeutics is 1.29 times less risky than Avadel Pharmaceuticals. It trades about 0.0 of its potential returns per unit of risk. Avadel Pharmaceuticals PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  247.00  in Avadel Pharmaceuticals PLC on February 23, 2024 and sell it today you would earn a total of  1,310  from holding Avadel Pharmaceuticals PLC or generate 530.57% return on investment over 90 days.

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

Gain Therapeutics  vs.  Avadel Pharmaceuticals PLC

Gain Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gain Therapeutics 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 fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Avadel Pharmaceuticals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avadel Pharmaceuticals PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Avadel Pharmaceuticals disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gain Therapeutics and Avadel Pharmaceuticals

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

The idea behind Gain Therapeutics and Avadel Pharmaceuticals PLC 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.