Correlation Between Durect and Cyclacel Pharmaceuticals

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

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

Diversification Opportunities for Durect and Cyclacel Pharmaceuticals

0.04

Correlation Coefficient

Durect  Cyclacel Pharmaceuticals

Significant diversification

The 3 months correlation between Durect and Cyclacel is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Durect and Cyclacel Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclacel Pharmaceuticals 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 Cyclacel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclacel Pharmaceuticals has no effect on the direction of Durect i.e., Durect and Cyclacel Pharmaceuticals go up and down completely randomly.

Pair Corralation between Durect and Cyclacel Pharmaceuticals

Given the investment horizon of 90 days Durect is expected to generate 0.84 times more return on investment than Cyclacel Pharmaceuticals. However, Durect is 1.19 times less risky than Cyclacel Pharmaceuticals. It trades about -0.02 of its potential returns per unit of risk. Cyclacel Pharmaceuticals is currently generating about -0.03 per unit of risk. If you would invest  92.00  in Durect on December 2, 2024 and sell it today you would lose (12.00) from holding Durect or give up 13.04% of portfolio value over 90 days.

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

Durect  vs.  Cyclacel Pharmaceuticals

Durect

Risk-Adjusted Performance

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 fairly strong basic indicators, Durect is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Cyclacel Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cyclacel Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Durect and Cyclacel Pharmaceuticals

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

The idea behind Durect and Cyclacel 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.