Correlation Between Axcella Health and Processa Pharmaceuticals

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

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

Diversification Opportunities for Axcella Health and Processa Pharmaceuticals

0.0

Correlation Coefficient

Axcella Health  Processa Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Axcella and Processa is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Axcella Health and Processa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Processa Pharmaceuticals and Axcella Health 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 Axcella Health are associated (or correlated) with Processa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Processa Pharmaceuticals has no effect on the direction of Axcella Health i.e., Axcella Health and Processa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Axcella Health and Processa Pharmaceuticals

If you would invest (100.00) in Axcella Health on November 27, 2024 and sell it today you would earn a total of  100.00  from holding Axcella Health or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Axcella Health  vs.  Processa Pharmaceuticals

Axcella Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axcella Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Axcella Health is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Processa Pharmaceuticals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Axcella Health and Processa Pharmaceuticals

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

The idea behind Axcella Health and Processa 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.