Correlation Between ACADIA Pharmaceuticals and Reviva Pharmaceuticals

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

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

Diversification Opportunities for ACADIA Pharmaceuticals and Reviva Pharmaceuticals

0.57

Correlation Coefficient

ACADIA Pharmaceuticals  Reviva Pharmaceuticals

Very weak diversification

The 3 months correlation between ACADIA and Reviva is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ACADIA Pharmaceuticals and Reviva Pharmaceuticals Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reviva Pharmaceuticals 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 Reviva Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reviva Pharmaceuticals has no effect on the direction of ACADIA Pharmaceuticals i.e., ACADIA Pharmaceuticals and Reviva Pharmaceuticals go up and down completely randomly.

Pair Corralation between ACADIA Pharmaceuticals and Reviva Pharmaceuticals

Given the investment horizon of 90 days ACADIA Pharmaceuticals is expected to generate 2.42 times less return on investment than Reviva Pharmaceuticals. But when comparing it to its historical volatility, ACADIA Pharmaceuticals is 2.16 times less risky than Reviva Pharmaceuticals. It trades about 0.01 of its potential returns per unit of risk. Reviva Pharmaceuticals Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  431.00  in Reviva Pharmaceuticals Holdings on October 10, 2024 and sell it today you would lose (231.00) from holding Reviva Pharmaceuticals Holdings or give up 53.6% of portfolio value over 90 days.

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

ACADIA Pharmaceuticals  vs.  Reviva Pharmaceuticals Holding

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.

Reviva Pharmaceuticals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reviva Pharmaceuticals Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Reviva Pharmaceuticals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ACADIA Pharmaceuticals and Reviva Pharmaceuticals

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

The idea behind ACADIA Pharmaceuticals and Reviva Pharmaceuticals Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.