Correlation Between Durect and Cardio Diagnostics

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

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

Diversification Opportunities for Durect and Cardio Diagnostics

-0.63

Correlation Coefficient

Durect  Cardio Diagnostics

Excellent diversification

The 3 months correlation between Durect and Cardio is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Durect and Cardio Diagnostics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardio Diagnostics 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 Cardio Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardio Diagnostics has no effect on the direction of Durect i.e., Durect and Cardio Diagnostics go up and down completely randomly.

Pair Corralation between Durect and Cardio Diagnostics

Given the investment horizon of 90 days Durect is expected to under-perform the Cardio Diagnostics. But the stock apears to be less risky and, when comparing its historical volatility, Durect is 2.56 times less risky than Cardio Diagnostics. The stock trades about -0.07 of its potential returns per unit of risk. The Cardio Diagnostics Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Cardio Diagnostics Holdings on October 1, 2024 and sell it today you would earn a total of  72.00  from holding Cardio Diagnostics Holdings or generate 342.86% return on investment over 90 days.

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

Durect  vs.  Cardio Diagnostics 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.

Cardio Diagnostics

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cardio Diagnostics Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Cardio Diagnostics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Durect and Cardio Diagnostics

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

The idea behind Durect and Cardio Diagnostics 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 Global Correlations module to find global opportunities by holding instruments from different markets.