Correlation Between Adagene and Eledon Pharmaceuticals

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

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

Diversification Opportunities for Adagene and Eledon Pharmaceuticals

0.17

Correlation Coefficient

Adagene  Eledon Pharmaceuticals

Average diversification

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

Pair Corralation between Adagene and Eledon Pharmaceuticals

Given the investment horizon of 90 days Adagene is expected to generate 11.06 times less return on investment than Eledon Pharmaceuticals. In addition to that, Adagene is 1.67 times more volatile than Eledon Pharmaceuticals. It trades about 0.01 of its total potential returns per unit of risk. Eledon Pharmaceuticals is currently generating about 0.12 per unit of volatility. If you would invest  400.00  in Eledon Pharmaceuticals on September 16, 2024 and sell it today you would earn a total of  38.00  from holding Eledon Pharmaceuticals or generate 9.5% return on investment over 90 days.

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

Adagene  vs.  Eledon Pharmaceuticals

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 inconsistent 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.

Eledon Pharmaceuticals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eledon Pharmaceuticals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Eledon Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adagene and Eledon Pharmaceuticals

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

The idea behind Adagene and Eledon Pharmaceuticals 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.