Correlation Between Algernon Pharmaceuticals and GH Research

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

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

Diversification Opportunities for Algernon Pharmaceuticals and GH Research

0.02

Correlation Coefficient

Algernon Pharmaceuticals  GH Research

Significant diversification

The 3 months correlation between Algernon and GHRS is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Algernon Pharmaceuticals and GH Research PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GH Research PLC and Algernon Pharmaceuticals 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 Algernon Pharmaceuticals are associated (or correlated) with GH Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GH Research PLC has no effect on the direction of Algernon Pharmaceuticals i.e., Algernon Pharmaceuticals and GH Research go up and down completely randomly.

Pair Corralation between Algernon Pharmaceuticals and GH Research

Assuming the 90 days horizon Algernon Pharmaceuticals is expected to generate 2.13 times more return on investment than GH Research. However, Algernon Pharmaceuticals is 2.13 times more volatile than GH Research PLC. It trades about 0.04 of its potential returns per unit of risk. GH Research PLC is currently generating about 0.05 per unit of risk. If you would invest  5.60  in Algernon Pharmaceuticals on October 5, 2024 and sell it today you would lose (0.97) from holding Algernon Pharmaceuticals or give up 17.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Algernon Pharmaceuticals  vs.  GH Research PLC

Algernon Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algernon Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algernon Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GH Research PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GH Research PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, GH Research unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algernon Pharmaceuticals and GH Research

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

The idea behind Algernon Pharmaceuticals and GH Research PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.