Correlation Between Virax Biolabs and Avadel Pharmaceuticals

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

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

Diversification Opportunities for Virax Biolabs and Avadel Pharmaceuticals

-0.73

Correlation Coefficient

Virax Biolabs  Avadel Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Virax and Avadel is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Virax Biolabs Group and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals and Virax Biolabs 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 Virax Biolabs Group 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 Virax Biolabs i.e., Virax Biolabs and Avadel Pharmaceuticals go up and down completely randomly.

Pair Corralation between Virax Biolabs and Avadel Pharmaceuticals

Given the investment horizon of 90 days Virax Biolabs Group is expected to generate 2.1 times more return on investment than Avadel Pharmaceuticals. However, Virax Biolabs is 2.1 times more volatile than Avadel Pharmaceuticals PLC. It trades about 0.08 of its potential returns per unit of risk. Avadel Pharmaceuticals PLC is currently generating about 0.02 per unit of risk. If you would invest  98.00  in Virax Biolabs Group on March 5, 2024 and sell it today you would earn a total of  20.00  from holding Virax Biolabs Group or generate 20.41% return on investment over 90 days.

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

Virax Biolabs Group  vs.  Avadel Pharmaceuticals PLC

Virax Biolabs Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virax Biolabs Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Virax Biolabs showed solid returns over the last few months and may actually be approaching a breakup point.

Avadel Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avadel Pharmaceuticals PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Avadel Pharmaceuticals is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Virax Biolabs and Avadel Pharmaceuticals

The main advantage of trading using opposite Virax Biolabs and Avadel Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virax Biolabs 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 Virax Biolabs Group 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.