Correlation Between Covalon Technologies and Cipher Pharmaceuticals

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

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

Diversification Opportunities for Covalon Technologies and Cipher Pharmaceuticals

0.75

Correlation Coefficient

Covalon Technologies  Cipher Pharmaceuticals

Poor diversification

The 3 months correlation between Covalon and Cipher is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Covalon Technologies and Cipher Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cipher Pharmaceuticals and Covalon Technologies 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 Covalon Technologies are associated (or correlated) with Cipher Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cipher Pharmaceuticals has no effect on the direction of Covalon Technologies i.e., Covalon Technologies and Cipher Pharmaceuticals go up and down completely randomly.

Pair Corralation between Covalon Technologies and Cipher Pharmaceuticals

Assuming the 90 days horizon Covalon Technologies is expected to under-perform the Cipher Pharmaceuticals. In addition to that, Covalon Technologies is 1.08 times more volatile than Cipher Pharmaceuticals. It trades about -0.13 of its total potential returns per unit of risk. Cipher Pharmaceuticals is currently generating about -0.04 per unit of volatility. If you would invest  1,430  in Cipher Pharmaceuticals on December 30, 2024 and sell it today you would lose (173.00) from holding Cipher Pharmaceuticals or give up 12.1% of portfolio value over 90 days.

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

Covalon Technologies  vs.  Cipher Pharmaceuticals

Covalon Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Covalon Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Cipher Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cipher Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Covalon Technologies and Cipher Pharmaceuticals

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

The idea behind Covalon Technologies and Cipher 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.