Correlation Between Adhera Therapeutics and Alector

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

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

Diversification Opportunities for Adhera Therapeutics and Alector

0.14

Correlation Coefficient

Adhera Therapeutics  Alector

Average diversification

The 3 months correlation between Adhera and Alector is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Adhera Therapeutics and Alector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alector and Adhera 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 Adhera Therapeutics are associated (or correlated) with Alector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alector has no effect on the direction of Adhera Therapeutics i.e., Adhera Therapeutics and Alector go up and down completely randomly.

Pair Corralation between Adhera Therapeutics and Alector

Given the investment horizon of 90 days Adhera Therapeutics is expected to generate 3.37 times more return on investment than Alector. However, Adhera Therapeutics is 3.37 times more volatile than Alector. It trades about 0.12 of its potential returns per unit of risk. Alector is currently generating about -0.03 per unit of risk. If you would invest  64.00  in Adhera Therapeutics on October 7, 2024 and sell it today you would earn a total of  8.00  from holding Adhera Therapeutics or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	3.63%
Values	Daily Returns

Adhera Therapeutics  vs.  Alector

Adhera Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Adhera Therapeutics and Alector

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

The idea behind Adhera Therapeutics and Alector 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.