Correlation Between Adagene and Opthea

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

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

Diversification Opportunities for Adagene and Opthea

-0.18

Correlation Coefficient

Adagene  Opthea

Good diversification

The 3 months correlation between Adagene and Opthea is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Adagene and Opthea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opthea 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 Opthea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opthea has no effect on the direction of Adagene i.e., Adagene and Opthea go up and down completely randomly.

Pair Corralation between Adagene and Opthea

Given the investment horizon of 90 days Adagene is expected to under-perform the Opthea. In addition to that, Adagene is 1.36 times more volatile than Opthea. It trades about -0.03 of its total potential returns per unit of risk. Opthea is currently generating about 0.1 per unit of volatility. If you would invest  291.00  in Opthea on September 3, 2024 and sell it today you would earn a total of  78.00  from holding Opthea or generate 26.8% return on investment over 90 days.

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

Adagene  vs.  Opthea

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Opthea

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Opthea are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Opthea unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adagene and Opthea

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

The idea behind Adagene and Opthea 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.