Correlation Between Avadel Pharmaceuticals and Estrella Immunopharma

Can any of the company-specific risk be diversified away by investing in both Avadel Pharmaceuticals and Estrella Immunopharma 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 Estrella Immunopharma 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 Estrella Immunopharma, you can compare the effects of market volatilities on Avadel Pharmaceuticals and Estrella Immunopharma 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 Estrella Immunopharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avadel Pharmaceuticals and Estrella Immunopharma.

Diversification Opportunities for Avadel Pharmaceuticals and Estrella Immunopharma

0.21

Correlation Coefficient

Avadel Pharmaceuticals  Estrella Immunopharma

Modest diversification

The 3 months correlation between Avadel and Estrella is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals PLC and Estrella Immunopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estrella Immunopharma 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 Estrella Immunopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estrella Immunopharma has no effect on the direction of Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and Estrella Immunopharma go up and down completely randomly.

Pair Corralation between Avadel Pharmaceuticals and Estrella Immunopharma

Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to under-perform the Estrella Immunopharma. But the stock apears to be less risky and, when comparing its historical volatility, Avadel Pharmaceuticals PLC is 1.41 times less risky than Estrella Immunopharma. The stock trades about -0.08 of its potential returns per unit of risk. The Estrella Immunopharma is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  124.00  in Estrella Immunopharma on December 28, 2024 and sell it today you would lose (31.00) from holding Estrella Immunopharma or give up 25.0% of portfolio value over 90 days.

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

Avadel Pharmaceuticals PLC  vs.  Estrella Immunopharma

Avadel Pharmaceuticals

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Estrella Immunopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Estrella Immunopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Avadel Pharmaceuticals and Estrella Immunopharma

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

The idea behind Avadel Pharmaceuticals PLC and Estrella Immunopharma 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.