Correlation Between Denali Therapeutics and Eyenovia

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

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

Diversification Opportunities for Denali Therapeutics and Eyenovia

0.79

Correlation Coefficient

Denali Therapeutics  Eyenovia

Poor diversification

The 3 months correlation between Denali and Eyenovia is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Denali Therapeutics and Eyenovia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eyenovia and Denali Therapeutics 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 Denali Therapeutics are associated (or correlated) with Eyenovia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eyenovia has no effect on the direction of Denali Therapeutics i.e., Denali Therapeutics and Eyenovia go up and down completely randomly.

Pair Corralation between Denali Therapeutics and Eyenovia

Given the investment horizon of 90 days Denali Therapeutics is expected to generate 0.25 times more return on investment than Eyenovia. However, Denali Therapeutics is 3.93 times less risky than Eyenovia. It trades about -0.12 of its potential returns per unit of risk. Eyenovia is currently generating about -0.06 per unit of risk. If you would invest  2,652  in Denali Therapeutics on October 9, 2024 and sell it today you would lose (670.00) from holding Denali Therapeutics or give up 25.26% of portfolio value over 90 days.

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

Denali Therapeutics  vs.  Eyenovia

Denali Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Denali Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Eyenovia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eyenovia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Denali Therapeutics and Eyenovia

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

The idea behind Denali Therapeutics and Eyenovia 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.