Correlation Between Dermata Therapeutics and GT Biopharma

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

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

Diversification Opportunities for Dermata Therapeutics and GT Biopharma

0.37

Correlation Coefficient

Dermata Therapeutics  GT Biopharma

Weak diversification

The 3 months correlation between Dermata and GTBP is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dermata Therapeutics and GT Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Biopharma and Dermata 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 Dermata Therapeutics are associated (or correlated) with GT Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Biopharma has no effect on the direction of Dermata Therapeutics i.e., Dermata Therapeutics and GT Biopharma go up and down completely randomly.

Pair Corralation between Dermata Therapeutics and GT Biopharma

Given the investment horizon of 90 days Dermata Therapeutics is expected to under-perform the GT Biopharma. In addition to that, Dermata Therapeutics is 1.02 times more volatile than GT Biopharma. It trades about -0.04 of its total potential returns per unit of risk. GT Biopharma is currently generating about -0.01 per unit of volatility. If you would invest  1,779  in GT Biopharma on December 2, 2024 and sell it today you would lose (1,541) from holding GT Biopharma or give up 86.62% of portfolio value over 90 days.

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

Dermata Therapeutics  vs.  GT Biopharma

Dermata Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dermata Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Dermata Therapeutics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

GT Biopharma

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GT Biopharma are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, GT Biopharma may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dermata Therapeutics and GT Biopharma

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

The idea behind Dermata Therapeutics and GT Biopharma 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.