Correlation Between Opthea and Eliem Therapeutics

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

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

Diversification Opportunities for Opthea and Eliem Therapeutics

0.04

Correlation Coefficient

Opthea  Eliem Therapeutics

Significant diversification

The 3 months correlation between Opthea and Eliem is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Opthea and Eliem Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eliem Therapeutics and Opthea 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 Opthea are associated (or correlated) with Eliem Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eliem Therapeutics has no effect on the direction of Opthea i.e., Opthea and Eliem Therapeutics go up and down completely randomly.

Pair Corralation between Opthea and Eliem Therapeutics

Considering the 90-day investment horizon Opthea is expected to under-perform the Eliem Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Opthea is 1.55 times less risky than Eliem Therapeutics. The stock trades about -0.01 of its potential returns per unit of risk. The Eliem Therapeutics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  337.00  in Eliem Therapeutics on February 3, 2024 and sell it today you would earn a total of  502.00  from holding Eliem Therapeutics or generate 148.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.33%
Values	Daily Returns

Opthea  vs.  Eliem Therapeutics

Opthea

Risk-Adjusted Performance

3 of 100

Modest

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

Eliem Therapeutics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eliem Therapeutics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Eliem Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Opthea and Eliem Therapeutics

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

The idea behind Opthea and Eliem 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.