Correlation Between Ardelyx and FibroGen

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

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

Diversification Opportunities for Ardelyx and FibroGen

0.15

Correlation Coefficient

Ardelyx  FibroGen

Average diversification

The 3 months correlation between Ardelyx and FibroGen is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ardelyx and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen and Ardelyx 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 Ardelyx are associated (or correlated) with FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of Ardelyx i.e., Ardelyx and FibroGen go up and down completely randomly.

Pair Corralation between Ardelyx and FibroGen

Given the investment horizon of 90 days Ardelyx is expected to generate 0.4 times more return on investment than FibroGen. However, Ardelyx is 2.47 times less risky than FibroGen. It trades about -0.02 of its potential returns per unit of risk. FibroGen is currently generating about -0.04 per unit of risk. If you would invest  529.00  in Ardelyx on December 4, 2024 and sell it today you would lose (21.00) from holding Ardelyx or give up 3.97% of portfolio value over 90 days.

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

Ardelyx  vs.  FibroGen

Ardelyx

Risk-Adjusted Performance

Weak

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

FibroGen

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FibroGen are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, FibroGen displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ardelyx and FibroGen

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

The idea behind Ardelyx and FibroGen 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.