Correlation Between Adagene and ChitogenX

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

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

Diversification Opportunities for Adagene and ChitogenX

-0.03

Correlation Coefficient

Adagene  ChitogenX

Good diversification

The 3 months correlation between Adagene and ChitogenX is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Adagene and ChitogenX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChitogenX and Adagene 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 Adagene are associated (or correlated) with ChitogenX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChitogenX has no effect on the direction of Adagene i.e., Adagene and ChitogenX go up and down completely randomly.

Pair Corralation between Adagene and ChitogenX

Given the investment horizon of 90 days Adagene is expected to generate 0.8 times more return on investment than ChitogenX. However, Adagene is 1.25 times less risky than ChitogenX. It trades about -0.04 of its potential returns per unit of risk. ChitogenX is currently generating about -0.19 per unit of risk. If you would invest  286.00  in Adagene on September 4, 2024 and sell it today you would lose (67.00) from holding Adagene or give up 23.43% of portfolio value over 90 days.

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

Adagene  vs.  ChitogenX

Adagene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adagene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ChitogenX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChitogenX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Adagene and ChitogenX

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

The idea behind Adagene and ChitogenX 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.