Correlation Between Cognition Therapeutics and Scorpius Holdings

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

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

Diversification Opportunities for Cognition Therapeutics and Scorpius Holdings

-0.39

Correlation Coefficient

Cognition Therapeutics  Scorpius Holdings

Very good diversification

The 3 months correlation between Cognition and Scorpius is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cognition Therapeutics and Scorpius Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scorpius Holdings and Cognition 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 Cognition Therapeutics are associated (or correlated) with Scorpius Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scorpius Holdings has no effect on the direction of Cognition Therapeutics i.e., Cognition Therapeutics and Scorpius Holdings go up and down completely randomly.

Pair Corralation between Cognition Therapeutics and Scorpius Holdings

Given the investment horizon of 90 days Cognition Therapeutics is expected to generate 0.59 times more return on investment than Scorpius Holdings. However, Cognition Therapeutics is 1.7 times less risky than Scorpius Holdings. It trades about 0.32 of its potential returns per unit of risk. Scorpius Holdings is currently generating about 0.18 per unit of risk. If you would invest  46.00  in Cognition Therapeutics on October 8, 2024 and sell it today you would earn a total of  30.00  from holding Cognition Therapeutics or generate 65.22% return on investment over 90 days.

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

Cognition Therapeutics  vs.  Scorpius Holdings

Cognition Therapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cognition Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cognition Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Scorpius Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scorpius Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Scorpius Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cognition Therapeutics and Scorpius Holdings

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

The idea behind Cognition Therapeutics and Scorpius 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.