Correlation Between Aquestive Therapeutics and Neurocrine Biosciences

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

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

Diversification Opportunities for Aquestive Therapeutics and Neurocrine Biosciences

-0.31

Correlation Coefficient

Aquestive Therapeutics  Neurocrine Biosciences

Very good diversification

The 3 months correlation between Aquestive and Neurocrine is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aquestive Therapeutics and Neurocrine Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neurocrine Biosciences 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 Neurocrine Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neurocrine Biosciences has no effect on the direction of Aquestive Therapeutics i.e., Aquestive Therapeutics and Neurocrine Biosciences go up and down completely randomly.

Pair Corralation between Aquestive Therapeutics and Neurocrine Biosciences

Given the investment horizon of 90 days Aquestive Therapeutics is expected to under-perform the Neurocrine Biosciences. In addition to that, Aquestive Therapeutics is 1.41 times more volatile than Neurocrine Biosciences. It trades about -0.24 of its total potential returns per unit of risk. Neurocrine Biosciences is currently generating about -0.03 per unit of volatility. If you would invest  12,675  in Neurocrine Biosciences on November 29, 2024 and sell it today you would lose (916.00) from holding Neurocrine Biosciences or give up 7.23% of portfolio value over 90 days.

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

Aquestive Therapeutics  vs.  Neurocrine Biosciences

Aquestive Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aquestive Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Neurocrine Biosciences

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aquestive Therapeutics and Neurocrine Biosciences

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

The idea behind Aquestive Therapeutics and Neurocrine Biosciences 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.