Correlation Between Adagene and Gracell Biotechnologies

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

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

Diversification Opportunities for Adagene and Gracell Biotechnologies

-0.55

Correlation Coefficient

Adagene  Gracell Biotechnologies

Excellent diversification

The 3 months correlation between Adagene and Gracell is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Adagene and Gracell Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gracell Biotechnologies 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 Gracell Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gracell Biotechnologies has no effect on the direction of Adagene i.e., Adagene and Gracell Biotechnologies go up and down completely randomly.

Pair Corralation between Adagene and Gracell Biotechnologies

Given the investment horizon of 90 days Adagene is expected to generate 3.21 times less return on investment than Gracell Biotechnologies. But when comparing it to its historical volatility, Adagene is 1.07 times less risky than Gracell Biotechnologies. It trades about 0.04 of its potential returns per unit of risk. Gracell Biotechnologies is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Gracell Biotechnologies on October 10, 2024 and sell it today you would earn a total of  187.00  from holding Gracell Biotechnologies or generate 86.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	26.01%
Values	Daily Returns

Adagene  vs.  Gracell Biotechnologies

Adagene

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adagene are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Adagene is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Gracell Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gracell Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Gracell Biotechnologies is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Adagene and Gracell Biotechnologies

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

The idea behind Adagene and Gracell Biotechnologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.