Correlation Between Aadi Bioscience and Adhera Therapeutics

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

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

Diversification Opportunities for Aadi Bioscience and Adhera Therapeutics

0.04

Correlation Coefficient

Aadi Bioscience  Adhera Therapeutics

Significant diversification

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

Pair Corralation between Aadi Bioscience and Adhera Therapeutics

Given the investment horizon of 90 days Aadi Bioscience is expected to under-perform the Adhera Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Aadi Bioscience is 3.19 times less risky than Adhera Therapeutics. The stock trades about -0.02 of its potential returns per unit of risk. The Adhera Therapeutics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Adhera Therapeutics on October 7, 2024 and sell it today you would earn a total of  8.00  from holding Adhera Therapeutics or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	3.63%
Values	Daily Returns

Aadi Bioscience  vs.  Adhera Therapeutics

Aadi Bioscience

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aadi Bioscience are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Aadi Bioscience demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Adhera Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adhera Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Adhera Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aadi Bioscience and Adhera Therapeutics

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

The idea behind Aadi Bioscience and Adhera 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.