Correlation Between Acer Therapeutics and Biophytis

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

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

Diversification Opportunities for Acer Therapeutics and Biophytis

-0.17

Correlation Coefficient

Acer Therapeutics  Biophytis

Good diversification

The 3 months correlation between Acer and Biophytis is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Acer Therapeutics and Biophytis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biophytis and Acer Therapeutics 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 Acer Therapeutics are associated (or correlated) with Biophytis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biophytis has no effect on the direction of Acer Therapeutics i.e., Acer Therapeutics and Biophytis go up and down completely randomly.

Pair Corralation between Acer Therapeutics and Biophytis

Given the investment horizon of 90 days Acer Therapeutics is expected to under-perform the Biophytis. But the stock apears to be less risky and, when comparing its historical volatility, Acer Therapeutics is 1.43 times less risky than Biophytis. The stock trades about -0.07 of its potential returns per unit of risk. The Biophytis is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  15,800  in Biophytis on September 20, 2024 and sell it today you would lose (15,097) from holding Biophytis or give up 95.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.6%
Values	Daily Returns

Acer Therapeutics  vs.  Biophytis

Acer Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acer Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Acer Therapeutics is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Biophytis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biophytis has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Biophytis is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Acer Therapeutics and Biophytis

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

The idea behind Acer Therapeutics and Biophytis 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 Transaction History module to view history of all your transactions and understand their impact on performance.