Correlation Between Durect and Bio Path

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

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

Diversification Opportunities for Durect and Bio Path

0.61

Correlation Coefficient

Durect  Bio Path

Poor diversification

The 3 months correlation between Durect and Bio is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Durect and Bio Path Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Path Holdings and Durect 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 Durect are associated (or correlated) with Bio Path. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Path Holdings has no effect on the direction of Durect i.e., Durect and Bio Path go up and down completely randomly.

Pair Corralation between Durect and Bio Path

Given the investment horizon of 90 days Durect is expected to under-perform the Bio Path. But the stock apears to be less risky and, when comparing its historical volatility, Durect is 1.37 times less risky than Bio Path. The stock trades about -0.14 of its potential returns per unit of risk. The Bio Path Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Bio Path Holdings on September 3, 2024 and sell it today you would lose (22.00) from holding Bio Path Holdings or give up 22.22% of portfolio value over 90 days.

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

Durect  vs.  Bio Path Holdings

Durect

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Durect has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bio Path Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bio Path Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Durect and Bio Path

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

The idea behind Durect and Bio Path Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.