Correlation Between ACADIA Pharmaceuticals and Amarin PLC

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

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

Diversification Opportunities for ACADIA Pharmaceuticals and Amarin PLC

-0.67

Correlation Coefficient

ACADIA Pharmaceuticals  Amarin PLC

Excellent diversification

The 3 months correlation between ACADIA and Amarin is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding ACADIA Pharmaceuticals and Amarin PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarin PLC and ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals are associated (or correlated) with Amarin PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarin PLC has no effect on the direction of ACADIA Pharmaceuticals i.e., ACADIA Pharmaceuticals and Amarin PLC go up and down completely randomly.

Pair Corralation between ACADIA Pharmaceuticals and Amarin PLC

Given the investment horizon of 90 days ACADIA Pharmaceuticals is expected to under-perform the Amarin PLC. But the stock apears to be less risky and, when comparing its historical volatility, ACADIA Pharmaceuticals is 1.24 times less risky than Amarin PLC. The stock trades about -0.02 of its potential returns per unit of risk. The Amarin PLC is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Amarin PLC on October 12, 2024 and sell it today you would earn a total of  8.00  from holding Amarin PLC or generate 17.02% return on investment over 90 days.

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

ACADIA Pharmaceuticals  vs.  Amarin PLC

ACADIA Pharmaceuticals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ACADIA Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, ACADIA Pharmaceuticals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Amarin PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amarin PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Amarin PLC is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ACADIA Pharmaceuticals and Amarin PLC

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

The idea behind ACADIA Pharmaceuticals and Amarin 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.