Can any of the company-specific risk be diversified away by investing in both El Pollo and Acumen 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 El Pollo and Acumen Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Pollo Loco and Acumen Pharmaceuticals, you can compare the effects of market volatilities on El Pollo and Acumen 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 El Pollo with a short position of Acumen Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Pollo and Acumen Pharmaceuticals.
Diversification Opportunities for El Pollo and Acumen Pharmaceuticals
The 3 months correlation between LOCO and Acumen is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco and Acumen Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acumen Pharmaceuticals and El Pollo 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 El Pollo Loco are associated (or correlated) with Acumen Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acumen Pharmaceuticals has no effect on the direction of El Pollo i.e., El Pollo and Acumen Pharmaceuticals go up and down completely randomly.
Pair Corralation between El Pollo and Acumen Pharmaceuticals
Given the investment horizon of 90 days El Pollo Loco is expected to generate 0.7 times more return on investment than Acumen Pharmaceuticals. However, El Pollo Loco is 1.44 times less risky than Acumen Pharmaceuticals. It trades about 0.12 of its potential returns per unit of risk. Acumen Pharmaceuticals is currently generating about -0.17 per unit of risk. If you would invest 900.00 in El Pollo Loco on March 6, 2024 and sell it today you would earn a total of 186.00 from holding El Pollo Loco or generate 20.67% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in El Pollo Loco are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, El Pollo displayed solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Acumen Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.