Correlation Between Small Pharma and TRACON Pharmaceuticals

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

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

Diversification Opportunities for Small Pharma and TRACON Pharmaceuticals

0.29

Correlation Coefficient

Small Pharma  TRACON Pharmaceuticals

Modest diversification

The 3 months correlation between Small and TRACON is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Small Pharma and TRACON Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRACON Pharmaceuticals and Small Pharma 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 Small Pharma are associated (or correlated) with TRACON Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRACON Pharmaceuticals has no effect on the direction of Small Pharma i.e., Small Pharma and TRACON Pharmaceuticals go up and down completely randomly.

Pair Corralation between Small Pharma and TRACON Pharmaceuticals

If you would invest  160.00  in TRACON Pharmaceuticals on September 3, 2024 and sell it today you would earn a total of  0.00  from holding TRACON Pharmaceuticals or generate 0.0% return on investment over 90 days.

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

Small Pharma  vs.  TRACON Pharmaceuticals

Small Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Small Pharma is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TRACON Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRACON Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TRACON Pharmaceuticals is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Small Pharma and TRACON Pharmaceuticals

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

The idea behind Small Pharma and TRACON 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.