Correlation Between Axsome Therapeutics and CTT Pharmaceutical

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

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

Diversification Opportunities for Axsome Therapeutics and CTT Pharmaceutical

-0.17

Correlation Coefficient

Axsome Therapeutics  CTT Pharmaceutical

Good diversification

The 3 months correlation between Axsome and CTT is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Axsome Therapeutics and CTT Pharmaceutical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTT Pharmaceutical and Axsome 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 Axsome Therapeutics are associated (or correlated) with CTT Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTT Pharmaceutical has no effect on the direction of Axsome Therapeutics i.e., Axsome Therapeutics and CTT Pharmaceutical go up and down completely randomly.

Pair Corralation between Axsome Therapeutics and CTT Pharmaceutical

Given the investment horizon of 90 days Axsome Therapeutics is expected to under-perform the CTT Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, Axsome Therapeutics is 3.73 times less risky than CTT Pharmaceutical. The stock trades about -0.32 of its potential returns per unit of risk. The CTT Pharmaceutical Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5.02  in CTT Pharmaceutical Holdings on October 8, 2024 and sell it today you would earn a total of  0.89  from holding CTT Pharmaceutical Holdings or generate 17.73% return on investment over 90 days.

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

Axsome Therapeutics  vs.  CTT Pharmaceutical Holdings

Axsome Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axsome Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Axsome Therapeutics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

CTT Pharmaceutical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CTT Pharmaceutical Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CTT Pharmaceutical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Axsome Therapeutics and CTT Pharmaceutical

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

The idea behind Axsome Therapeutics and CTT Pharmaceutical Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.