Correlation Between Allarity Therapeutics and Biodexa Pharmaceticals

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

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

Diversification Opportunities for Allarity Therapeutics and Biodexa Pharmaceticals

0.26

Correlation Coefficient

Allarity Therapeutics  Biodexa Pharmaceticals

Modest diversification

The 3 months correlation between Allarity and Biodexa is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Allarity Therapeutics and Biodexa Pharmaceticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biodexa Pharmaceticals and Allarity Therapeutics 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 Allarity Therapeutics are associated (or correlated) with Biodexa Pharmaceticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biodexa Pharmaceticals has no effect on the direction of Allarity Therapeutics i.e., Allarity Therapeutics and Biodexa Pharmaceticals go up and down completely randomly.

Pair Corralation between Allarity Therapeutics and Biodexa Pharmaceticals

Given the investment horizon of 90 days Allarity Therapeutics is expected to generate 1.02 times more return on investment than Biodexa Pharmaceticals. However, Allarity Therapeutics is 1.02 times more volatile than Biodexa Pharmaceticals. It trades about 0.02 of its potential returns per unit of risk. Biodexa Pharmaceticals is currently generating about -0.21 per unit of risk. If you would invest  112.00  in Allarity Therapeutics on December 30, 2024 and sell it today you would lose (8.00) from holding Allarity Therapeutics or give up 7.14% of portfolio value over 90 days.

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

Allarity Therapeutics  vs.  Biodexa Pharmaceticals

Allarity Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allarity Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Allarity Therapeutics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Biodexa Pharmaceticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biodexa Pharmaceticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Allarity Therapeutics and Biodexa Pharmaceticals

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

The idea behind Allarity Therapeutics and Biodexa Pharmaceticals 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.