Correlation Between Avadel Pharmaceuticals and Context Therapeutics

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

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

Diversification Opportunities for Avadel Pharmaceuticals and Context Therapeutics

0.66

Correlation Coefficient

Avadel Pharmaceuticals  Context Therapeutics

Poor diversification

The 3 months correlation between Avadel and Context is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals PLC and Context Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Context Therapeutics and Avadel Pharmaceuticals 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 Avadel Pharmaceuticals PLC are associated (or correlated) with Context Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Context Therapeutics has no effect on the direction of Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and Context Therapeutics go up and down completely randomly.

Pair Corralation between Avadel Pharmaceuticals and Context Therapeutics

Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to generate 0.93 times more return on investment than Context Therapeutics. However, Avadel Pharmaceuticals PLC is 1.08 times less risky than Context Therapeutics. It trades about -0.13 of its potential returns per unit of risk. Context Therapeutics is currently generating about -0.15 per unit of risk. If you would invest  1,628  in Avadel Pharmaceuticals PLC on October 20, 2024 and sell it today you would lose (853.00) from holding Avadel Pharmaceuticals PLC or give up 52.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.04%
Values	Daily Returns

Avadel Pharmaceuticals PLC  vs.  Context Therapeutics

Avadel Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avadel Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Context Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Context Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Avadel Pharmaceuticals and Context Therapeutics

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

The idea behind Avadel Pharmaceuticals PLC and Context Therapeutics 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.