Correlation Between Journey Medical and Kala Pharmaceuticals

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

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

Diversification Opportunities for Journey Medical and Kala Pharmaceuticals

-0.1

Correlation Coefficient

Journey Medical  Kala Pharmaceuticals

Good diversification

The 3 months correlation between Journey and Kala is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Journey Medical Corp and Kala Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kala Pharmaceuticals and Journey Medical 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 Journey Medical Corp are associated (or correlated) with Kala Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kala Pharmaceuticals has no effect on the direction of Journey Medical i.e., Journey Medical and Kala Pharmaceuticals go up and down completely randomly.

Pair Corralation between Journey Medical and Kala Pharmaceuticals

Given the investment horizon of 90 days Journey Medical Corp is expected to generate 0.71 times more return on investment than Kala Pharmaceuticals. However, Journey Medical Corp is 1.4 times less risky than Kala Pharmaceuticals. It trades about 0.17 of its potential returns per unit of risk. Kala Pharmaceuticals is currently generating about 0.01 per unit of risk. If you would invest  397.00  in Journey Medical Corp on December 28, 2024 and sell it today you would earn a total of  195.00  from holding Journey Medical Corp or generate 49.12% return on investment over 90 days.

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

Journey Medical Corp  vs.  Kala Pharmaceuticals

Journey Medical Corp

Risk-Adjusted Performance

Good

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

Kala Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kala Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Kala Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Journey Medical and Kala Pharmaceuticals

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

The idea behind Journey Medical Corp and Kala 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 Stocks Directory module to find actively traded stocks across global markets.