Correlation Between Agios Pharm and Dermata Therapeutics

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

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

Diversification Opportunities for Agios Pharm and Dermata Therapeutics

-0.3

Correlation Coefficient

Agios Pharm  Dermata Therapeutics

Very good diversification

The 3 months correlation between Agios and Dermata is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Agios Pharm and Dermata Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dermata Therapeutics and Agios Pharm 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 Agios Pharm are associated (or correlated) with Dermata Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dermata Therapeutics has no effect on the direction of Agios Pharm i.e., Agios Pharm and Dermata Therapeutics go up and down completely randomly.

Pair Corralation between Agios Pharm and Dermata Therapeutics

Given the investment horizon of 90 days Agios Pharm is expected to under-perform the Dermata Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Agios Pharm is 1.93 times less risky than Dermata Therapeutics. The stock trades about -0.03 of its potential returns per unit of risk. The Dermata Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  134.00  in Dermata Therapeutics on December 29, 2024 and sell it today you would earn a total of  8.00  from holding Dermata Therapeutics or generate 5.97% return on investment over 90 days.

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

Agios Pharm  vs.  Dermata Therapeutics

Agios Pharm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agios Pharm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Agios Pharm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dermata Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dermata Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Dermata Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agios Pharm and Dermata Therapeutics

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

The idea behind Agios Pharm and Dermata Therapeutics 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.