Correlation Between Aquestive Therapeutics and Alkermes Plc

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

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

Diversification Opportunities for Aquestive Therapeutics and Alkermes Plc

-0.21

Correlation Coefficient

Aquestive Therapeutics  Alkermes Plc

Very good diversification

The 3 months correlation between Aquestive and Alkermes is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Aquestive Therapeutics and Alkermes Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkermes Plc and Aquestive 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 Aquestive Therapeutics are associated (or correlated) with Alkermes Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkermes Plc has no effect on the direction of Aquestive Therapeutics i.e., Aquestive Therapeutics and Alkermes Plc go up and down completely randomly.

Pair Corralation between Aquestive Therapeutics and Alkermes Plc

Given the investment horizon of 90 days Aquestive Therapeutics is expected to generate 1.75 times more return on investment than Alkermes Plc. However, Aquestive Therapeutics is 1.75 times more volatile than Alkermes Plc. It trades about 0.1 of its potential returns per unit of risk. Alkermes Plc is currently generating about 0.04 per unit of risk. If you would invest  419.00  in Aquestive Therapeutics on August 31, 2024 and sell it today you would earn a total of  97.00  from holding Aquestive Therapeutics or generate 23.15% return on investment over 90 days.

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

Aquestive Therapeutics  vs.  Alkermes Plc

Aquestive Therapeutics

Risk-Adjusted Performance

7 of 100

OK

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

Alkermes Plc

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alkermes Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Alkermes Plc is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aquestive Therapeutics and Alkermes Plc

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

The idea behind Aquestive Therapeutics and Alkermes 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.