Correlation Between ATAI Life and Algernon Pharmaceuticals

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

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

Diversification Opportunities for ATAI Life and Algernon Pharmaceuticals

-0.25

Correlation Coefficient

ATAI Life  Algernon Pharmaceuticals

Very good diversification

The 3 months correlation between ATAI and Algernon is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding ATAI Life Sciences and Algernon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algernon Pharmaceuticals and ATAI Life 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 ATAI Life Sciences are associated (or correlated) with Algernon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algernon Pharmaceuticals has no effect on the direction of ATAI Life i.e., ATAI Life and Algernon Pharmaceuticals go up and down completely randomly.

Pair Corralation between ATAI Life and Algernon Pharmaceuticals

Given the investment horizon of 90 days ATAI Life Sciences is expected to generate 0.54 times more return on investment than Algernon Pharmaceuticals. However, ATAI Life Sciences is 1.86 times less risky than Algernon Pharmaceuticals. It trades about 0.02 of its potential returns per unit of risk. Algernon Pharmaceuticals is currently generating about 0.01 per unit of risk. If you would invest  120.00  in ATAI Life Sciences on September 23, 2024 and sell it today you would lose (1.00) from holding ATAI Life Sciences or give up 0.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

ATAI Life Sciences  vs.  Algernon Pharmaceuticals

ATAI Life Sciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ATAI Life Sciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, ATAI Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Algernon Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algernon Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algernon Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ATAI Life and Algernon Pharmaceuticals

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

The idea behind ATAI Life Sciences and Algernon Pharmaceuticals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.