Correlation Between Ardelyx and Opko Health

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

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

Diversification Opportunities for Ardelyx and Opko Health

0.28

Correlation Coefficient

Ardelyx  Opko Health

Modest diversification

The 3 months correlation between Ardelyx and Opko is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ardelyx and Opko Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opko Health 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 Opko Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opko Health has no effect on the direction of Ardelyx i.e., Ardelyx and Opko Health go up and down completely randomly.

Pair Corralation between Ardelyx and Opko Health

Given the investment horizon of 90 days Ardelyx is expected to generate 1.24 times less return on investment than Opko Health. In addition to that, Ardelyx is 1.75 times more volatile than Opko Health. It trades about 0.06 of its total potential returns per unit of risk. Opko Health is currently generating about 0.14 per unit of volatility. If you would invest  154.00  in Opko Health on December 20, 2024 and sell it today you would earn a total of  32.00  from holding Opko Health or generate 20.78% return on investment over 90 days.

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

Ardelyx  vs.  Opko Health

Ardelyx

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ardelyx are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Ardelyx showed solid returns over the last few months and may actually be approaching a breakup point.

Opko Health

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Opko Health are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Opko Health disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ardelyx and Opko Health

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

The idea behind Ardelyx and Opko Health 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.