Correlation Between ChitogenX and Processa Pharmaceuticals

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

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

Diversification Opportunities for ChitogenX and Processa Pharmaceuticals

0.85

Correlation Coefficient

ChitogenX  Processa Pharmaceuticals

Very poor diversification

The 3 months correlation between ChitogenX and Processa is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ChitogenX and Processa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Processa Pharmaceuticals and ChitogenX 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 ChitogenX 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 ChitogenX i.e., ChitogenX and Processa Pharmaceuticals go up and down completely randomly.

Pair Corralation between ChitogenX and Processa Pharmaceuticals

Assuming the 90 days horizon ChitogenX is expected to generate 2.22 times more return on investment than Processa Pharmaceuticals. However, ChitogenX is 2.22 times more volatile than Processa Pharmaceuticals. It trades about -0.05 of its potential returns per unit of risk. Processa Pharmaceuticals is currently generating about -0.28 per unit of risk. If you would invest  1.50  in ChitogenX on December 30, 2024 and sell it today you would lose (0.79) from holding ChitogenX or give up 52.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.38%
Values	Daily Returns

ChitogenX  vs.  Processa Pharmaceuticals

ChitogenX

Risk-Adjusted Performance

Very Weak

Over the last 90 days ChitogenX 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 nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ChitogenX and Processa Pharmaceuticals

The main advantage of trading using opposite ChitogenX and Processa Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChitogenX 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 ChitogenX 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.