Correlation Between Edesa Biotech and Amylyx Pharmaceuticals

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

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

Diversification Opportunities for Edesa Biotech and Amylyx Pharmaceuticals

-0.88

Correlation Coefficient

Edesa Biotech  Amylyx Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Edesa and Amylyx is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Edesa Biotech and Amylyx Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amylyx Pharmaceuticals and Edesa Biotech 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 Edesa Biotech are associated (or correlated) with Amylyx Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amylyx Pharmaceuticals has no effect on the direction of Edesa Biotech i.e., Edesa Biotech and Amylyx Pharmaceuticals go up and down completely randomly.

Pair Corralation between Edesa Biotech and Amylyx Pharmaceuticals

Given the investment horizon of 90 days Edesa Biotech is expected to under-perform the Amylyx Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Edesa Biotech is 1.36 times less risky than Amylyx Pharmaceuticals. The stock trades about -0.19 of its potential returns per unit of risk. The Amylyx Pharmaceuticals is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  216.00  in Amylyx Pharmaceuticals on September 2, 2024 and sell it today you would earn a total of  338.00  from holding Amylyx Pharmaceuticals or generate 156.48% return on investment over 90 days.

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

Edesa Biotech  vs.  Amylyx Pharmaceuticals

Edesa Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edesa Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat 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.

Amylyx Pharmaceuticals

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amylyx Pharmaceuticals are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Amylyx Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edesa Biotech and Amylyx Pharmaceuticals

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

The idea behind Edesa Biotech and Amylyx 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 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.