Correlation Between Artelo Biosciences and Axcella Health

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

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

Diversification Opportunities for Artelo Biosciences and Axcella Health

0.6

Correlation Coefficient

Artelo Biosciences  Axcella Health

Poor diversification

The 3 months correlation between Artelo and Axcella is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Artelo Biosciences and Axcella Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axcella Health and Artelo Biosciences 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 Artelo Biosciences are associated (or correlated) with Axcella Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axcella Health has no effect on the direction of Artelo Biosciences i.e., Artelo Biosciences and Axcella Health go up and down completely randomly.

Pair Corralation between Artelo Biosciences and Axcella Health

Assuming the 90 days horizon Artelo Biosciences is expected to generate 5.22 times more return on investment than Axcella Health. However, Artelo Biosciences is 5.22 times more volatile than Axcella Health. It trades about 0.12 of its potential returns per unit of risk. Axcella Health is currently generating about 0.03 per unit of risk. If you would invest  5.01  in Artelo Biosciences on September 5, 2024 and sell it today you would lose (4.45) from holding Artelo Biosciences or give up 88.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.84%
Values	Daily Returns

Artelo Biosciences  vs.  Axcella Health

Artelo Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

Axcella Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axcella Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Axcella Health is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Artelo Biosciences and Axcella Health

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

The idea behind Artelo Biosciences and Axcella 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.