Correlation Between Avadel Pharmaceuticals and TruBridge

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

Diversification Opportunities for Avadel Pharmaceuticals and TruBridge

-0.7

Correlation Coefficient

Avadel Pharmaceuticals  TruBridge

Excellent diversification

The 3 months correlation between Avadel and TruBridge is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals PLC and TruBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TruBridge 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 TruBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TruBridge has no effect on the direction of Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and TruBridge go up and down completely randomly.

Pair Corralation between Avadel Pharmaceuticals and TruBridge

Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to under-perform the TruBridge. In addition to that, Avadel Pharmaceuticals is 1.76 times more volatile than TruBridge. It trades about -0.04 of its total potential returns per unit of risk. TruBridge is currently generating about 0.27 per unit of volatility. If you would invest  1,866  in TruBridge on December 23, 2024 and sell it today you would earn a total of  908.00  from holding TruBridge or generate 48.66% return on investment over 90 days.

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

Avadel Pharmaceuticals PLC  vs.  TruBridge

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 latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

TruBridge

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TruBridge are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, TruBridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avadel Pharmaceuticals and TruBridge

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

The idea behind Avadel Pharmaceuticals PLC and TruBridge 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.