Correlation Between Champions Oncology and Edgewise Therapeutics

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

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

Diversification Opportunities for Champions Oncology and Edgewise Therapeutics

-0.34

Correlation Coefficient

Champions Oncology  Edgewise Therapeutics

Very good diversification

The 3 months correlation between Champions and Edgewise is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Champions Oncology and Edgewise Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewise Therapeutics and Champions Oncology 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 Champions Oncology are associated (or correlated) with Edgewise Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewise Therapeutics has no effect on the direction of Champions Oncology i.e., Champions Oncology and Edgewise Therapeutics go up and down completely randomly.

Pair Corralation between Champions Oncology and Edgewise Therapeutics

Given the investment horizon of 90 days Champions Oncology is expected to generate 1.5 times less return on investment than Edgewise Therapeutics. But when comparing it to its historical volatility, Champions Oncology is 1.37 times less risky than Edgewise Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Edgewise Therapeutics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,671  in Edgewise Therapeutics on September 22, 2024 and sell it today you would earn a total of  1,407  from holding Edgewise Therapeutics or generate 84.2% return on investment over 90 days.

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

Champions Oncology  vs.  Edgewise Therapeutics

Champions Oncology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champions Oncology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Champions Oncology reported solid returns over the last few months and may actually be approaching a breakup point.

Edgewise Therapeutics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewise Therapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Edgewise Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Champions Oncology and Edgewise Therapeutics

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

The idea behind Champions Oncology and Edgewise Therapeutics 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.